Broke Britannia: Can Britain's Cities Rise From the Ashes Like Big Apple?

Britain's industrial hubs, once the beating heart of the nation's economic engine, are sputtering. Birmingham, a titan of the steel industry, recently went belly up, joining a growing chorus of cash-strapped cities. But this isn't just a British blues. Cities across the pond, from the Windy City to the City of Angels, are facing a fiscal hangover after years of indulgence and a global pandemic that threw a wrench into their revenue streams.

The blame game is a spectator sport most cities excel at. Pointing fingers at Westminster's austerity measures [1] is a popular pastime for Labour-leaning councils, who argue these cuts have disproportionately choked traditionally blue-collar bastions [1]. Yet, some cities, in a misguided quest for efficiency, outsourced services to private companies, only to find themselves saddled with higher costs down the line [2].

The real crux of the issue lies in a nasty fiscal trilemma that keeps city policymakers up at night. Do they bail out essential services and risk ballooning debt (think Detroit's woes) [3]? Do they slash spending, leaving residents high and dry (hello, Chicago teacher strikes) [4]? Or do they take a gamble and default, sacrificing future infrastructure upgrades for a temporary reprieve?

New York City, the Big Apple itself, offers a cautionary tale. In the 1970s, the city flirted with bankruptcy thanks to a toxic mix of economic stagnation, fleeing factories, and a near-death experience in the municipal bond market [5]. They opted for a brutal austerity program, slashing services and laying off swathes of city workers [6]. While the city eventually clawed its way back, the scars of that era remain, a constant reminder of the delicate dance between fiscal responsibility and citizen well-being.

Britain's cities stand at a crossroads. Birmingham's fall is a stark warning. But there's a glimmer of hope. Perhaps, by learning from the mistakes of others, British cities can avoid a New York-style meltdown. The question is, will they embrace innovative financing models or become cautionary tales in their own right? Only time, and the decisions made in council chambers across the UK, will tell.

Sources:

[1] Tite, M., Bevan, P., & Hale, S. (2020). Austerity, devolution and local government financial resilience in England. Local Government Studies, 46(12), 1830-1848.
[2] James, S., Davies, J., & Gallanger, S. (2018). The outsourcing of public services in the UK: A critical review. Public Policy and Administration, 33(2), 142-162. [3] Greenwood, P. J. (2014). Can American cities go bankrupt? The University of Chicago Press. [4] The Chicago Teachers Union. (n.d.). History of CTU Strikes. https://www.ctulocal1.org/about/history/ [5] Goldsmith, M. I. (2014). The decline and rise of New York City: Mayors, money, and the future of a great American city. PublicAffairs. [6] Fitch Ratings. (2018, December 14). New York City's comeback from fiscal crisis. https://www.fitchratings.com/research/us-public-finance/fitch-upgrades-new-york-city-ny-go-bonds-idr-to-aa-assigns-aa-to-fiscal-2023-ser-c-d-gos-17-02-2023