I currently live in Birmingham, England. It was called 'the workshop of the world', 'the city of a thousand trades' ....it was an industrial revolution boom town much like many cities in China are today.
Birmingham has a certain faded industrial look to it...there's miles of canals, miles of Victorian red-bricked warehouses & abandoned factories. So, what has happened to this post-industrial landscape? How is it being re-born/re-purposed/re-invigorated? Errr... it's not really, and this article explains why I think that is (hint: It's government interfering with the free market again).
This is the second most populous city in England, with a young well-educated population....but in my opinion with a severe lack of entrepreneurial drive.
It's regenerating, but at a painfully slow pace & generally directed from the top down, with partnerships between the city government and large developers. I'm a peculiar sort & enjoy wandering around the old industrial areas to have a look at what's going on there. (the answer is: usually not very much!).
I reason that there's an obvious synergy between a young population, the incredible opportunities that have opened up thanks to the internet & computer technology & old buildings just standing empty...it seems a really obvious fit - why aren't there hoards of 20-somethings creating/building/crafting/failing/experimenting/discovering in these buildings? In other words, shouldn't there be a thriving young entrepreneurial sector exploding ideas & products out of Birmingham like it was the 19th century all over again? (Only this time with better music)
The reason why this isn't happening is, I think, two fold:
1). The inbuilt belief structures that people in the UK are programmed with through their school life:
- someone like you couldn't do that
- you're no good, it's been done before
- if it was such a good idea, someone would already have done it
- people like us don't do that
- you're too young
- you need money to start a business
& on & on & on...we're all prisoners of our limiting beliefs & the UK has got this BAD!
2). Government. They control what you can do with buildings & they control the interest rate. Here's why that's bad:
Scenario A: Old Victorian warehouse, currently rents to a taxi repair company for £1000-per month. In the olden-days, you could value the commercial property as a % of what you rent it out for, say 10% (I think the historical figure was around 12%). In other words, a warehouse bringing in £1000/mth (£12k a year) would be valued at £120,000. In this world it would be fairly easy for some folks to get together, rent the place & use it as an inexpensive workshop space for their crazy/impractical/brilliant ideas. In my opinion, this is how the market SHOULD operate: old warehouse in Birmingham = cheap space to start a business...it would be a dynamic process that would move young innovative companies out of expensive London & allow people to start-up on a shoestring.
Scenario B: Poor people (i.e me) would be offered a mortgage on that old warehouse at 6% interest, however rich people (i.e large developers) can get funding for almost 0% interest - what Max Keiser calls 'Interest Rate Apartheid'. This totally changes the financial landscape - access to this virtually free capital sends property prices shooting up, even when there is no market reason for the increase. I.E If I can buy that warehouse for £1 Million, but pay virtually no interest on the loan, then I can STILL make a profit renting it out for £1000-a-month. O.k our would-be entrepreneurs can STILL rent the place for £1000 BUT they could never hope to buy/develop their own property if the business is successful, they'll forever be serfs renting from the property-owning gentry & at risk of being shut down or rents suddenly rising to gobble up their profits.
Scenario C: Government planning decisions can suddenly change this £100k (scenario A) or £1000k (scenario B) property into a £10 MILLION property? How? By 'allowing' the warehouse to be redeveloped into 40 'luxury' flats for Chinese investors to never live in.
I look around Birmingham & instead of scenario A, I see a mixture of scenario B & C... absurdly expensive dilapidated buildings siting empty or under-utilised while their owners wait for some developer (in collusion with the council) to eventually come in & make them rich. But, it's not productive. Nothing new is being created, no products are being exported, no companies are striking out to take down Google, or training 1000 apprentices for highly skilled manufacturing. It's not real, it's a sham.
Now, how do I solve this?