It is also time to accept that there has been a permanent and irreversible shift away from manufacturing jobs in rich countries. Even if a meaningful share of manufacturing activity is repatriated from low-cost locations to rich countries, high levels of automation mean the sector will not reclaim its historical role as a ladder of upward economic mobility for those without a higher education. The same can be said for the clerical work that was offshored in recent decades and is now increasingly being digitized and replaced by artificial intelligence.

We have been too slow to act on these trends. The power of specialization makes global trade a potent mechanism for increasing the world’s total productive capacity, making goods and services cheaper and more abundant. And technological change is the bedrock of rising living standards over the long run. But both also create significant friction as workers are forced to adjust to shifting patterns in the availability of jobs. Initiatives like the Trade Adjustment Assistance Program in the US, which focuses on providing workers displaced by globalization with financial support for retraining and relocation, have simply been far too modest to have any meaningful impact.

As traditional middle-class jobs have disappeared, many once prosperous cities and towns in the United States, Britain, France and elsewhere have entered into spirals of decline, trapping their inhabitants in generations of poverty. The fact that many living in these places have turned to populist leaders is understandable: the system no longer works for them.

Ignoring the places left behind by globalization and automation is no longer tenable. Looking ahead, a new agenda for a more inclusive economy is required, one that blends vision with pragmatism, acknowledging that no government can defy the laws of gravity that pull people together in the knowledge economy.

The experience of cities like Seattle or Leipzig shows there is hope for reversing the self-perpetuating cycles of joblessness and decay that plague many formerly prosperous cities. To rebuild struggling cities for the knowledge economy, governments need to come at the problem from two directions. First, they need to increase high-skill employment opportunities in the area, either by making it easier to start a new business or by offering incentives such as tax breaks for existing businesses to establish local operations. The latter should be treated with caution, given the potential for a race to the bottom between cities that ends up benefiting only shareholders. A better strategy is to selectively target a few businesses to serve as anchors for the local economy. Second, cities need to bring in the skilled workers that employers are seeking. Investing in universities is a good start, but is often not enough to keep workers around. Creating the type of urban environment that knowledge workers increasingly want to live in – dense and lively, not sprawling and lifeless – is also important. As the city builds a foundation of high-paid knowledge jobs, opportunities in the non-tradeable services that support them will also grow and local government finances will improve.

To sustain a less centralized economy, long-distance transportation infrastructure needs to be modernized in many rich countries. The invention of the railway was critical in supporting the dispersion of economic activity during industrialization. Often those very same rail networks are still the fastest way to get between many cities. Countries like Britain need to commit to high-speed rail, but they need to do it in the right way. Simply connecting Manchester to London risks drawing an even greater share of knowledge workers to the capital, particularly if hybrid working only requires them to be in Manchester for part of the week. Ensuring that Manchester is an attractive place for those workers to spend their leisure time would partially help to reduce that risk. But it is also important to consider how the multiple cities of the North could be knit together to create a metropolitan system that can serve as a counterweight to London.

The forces of agglomeration are strong, which is why it is important to maintain a pragmatic perspective on ‘levelling up’ struggling places. The economies of Britain and France need not implode entirely into their capital cities, but it is also not realistic to expect a long list of small cities and towns to thrive in a global economy in which scale is increasingly important for competitiveness.

Relocation is hard. Friendships fall apart, treasured places are lost, and family is far away. It is also expensive, which is why providing mobility vouchers to help those whose jobs have been displaced is a smart idea. The bigger problem, however, is that the economics often simply do not stack up, as the higher cost of living in many thriving cities – particularly when it comes to housing – more than offsets the potential for higher wages for less skilled workers. That leads many to stay put in left-behind places, which only compounds the problem, as too many people chase too few low-skill jobs. This is why making cities like London, New York and San Francisco more affordable is so important.

And whether you live in a rich or poor neighborhood in a rich or poor place, all children must be given access to a good education. A failure to do so is not only profoundly unfair, but also deeply inefficient, as so much latent potential is wasted. Access to education will never be levelled in countries like the United States unless the funding of schools is decoupled from local economic conditions. With education one of the best investments a society can make in today’s knowledge economy, it’s high time for a new deal on how it is funded.

Given the pace of technological change today, there is a need to rethink the full lifecycle of education. The idea of a stage of learning followed by a stage of working followed by a stage of retirement is now obsolete. Rather than retrenching workers when they no longer have the requisite skills, companies should be incentivized to retain, reskill and, if necessary, relocate them for new roles. Shifting responsibility for reskilling to employers will increase their openness to cheaper methods of learning, such as micro-credentials, that today are often not accepted as a valid alternative to a degree, in turn lowering the overall cost burden to society.

Universities should play a proactive role in partnering with companies to assist them in the delivery of such programs. Embedding the reskilling process within firms will also reduce the likelihood that displaced workers embark on the process of gaining a new skillset only to find themselves unable to secure a job at the end of it.

From Age of the City: Why our Future will be Won or Lost Together by Ian Goldin and Tom Lee-Devlin


  • Ian Goldin is Professor of Globalization and Development at the University of Oxford. He was economic advisor to President Mandela, Vice President of the World Bank, and the founding Director of the Oxford Martin School. His books include Rescue: From Global Crisis to a Better World (Sceptre/Hodder, 2021), Terra Incognita: 100 Maps to Survive the Next 100 Years (Century/Penguin Random House, 2020), and Age of Discovery: Navigating the Risks and Rewards of our Second Renaissance (Bloomsbury, 2016).

    Tom Lee-Devlin is a writer at The Economist. He previously worked as a management consultant at Bain & Company and led research for the firm’s global think tank, Bain Futures.