Aviation: how ‘global race’ mercantilism produces muddled thinking
London Heathrow Limited, for example, argues: ‘The Government’s vision is for Britain to win the global race for jobs and economic growth. To do so, we must be better connected to future growth markets – Asia, South America, North America – than our European competitors. Heathrow is one of the world’s best connected hubs and is well placed to help Britain win the global race.’
The Confederation of British Industry contends: ‘[I]n the last two decades, Heathrow’s growth rate has fallen behind that of other EU hubs as capacity constraints have hit. The UK hub has grown 53%, substantially lower than Frankfurt (84%), Paris Charles de Gaulle (142%) and Amsterdam Schiphol (160%). Indexing these growth rates reveals the extent to which Heathrow risks falling behind its major competitors […] The UK’s aviation constraints are already having a demonstrable impact on our ability to build connections with the biggest high-growth economies – relative to the success of our closest competitors in establishing their own links.’
The position of the British Chambers of Commerce is similar: ‘[C]ontinued delay risks leaving the UK at a competitive disadvantage to its global competitors. While Britain dithers, others do. Foreign competitors are forging ahead on new air links while we sit and twiddle our thumbs.’
The Institute of Directors adds ‘The lamentable failure to increase airport capacity means that jobs are already being lost to our competitors.’
It is easy to see where they are coming from. Appealing to public concerns about falling behind others, about being left out of something, is an elegant way of bypassing the highly emotive issue of climate change. It allows supporters of airport expansion to make their case without directly confronting their opponents.
But the mercantilist ‘global race’ rhetoric produces muddled economic thinking. Firstly, the above arguments do not really provide a case for airport expansion, because they only refer to business travel and cargo flights. Business travel accounts for less than a quarter of total UK air travel; so a policy of strict airport slot rationing could be just as compatible with this rhetoric as a policy of airport expansion, provided the rationing process heavily favours business/cargo over leisure travel. So would a coordinated international moratorium on airport expansion: the global racers speak of investment in airport infrastructure as if it were a sort of arms race, and the best way to end an arms race is an agreement among the warring parties to simultaneously stop producing arms.
The global racers’ view of airports as competitors is also too narrow, because it overlooks the degree of complementarity that exists especially between international hubs. Of course, if two otherwise identical cities differ only in terms of air connectivity, then they compete for investment on those terms. If for example a Chinese company plans to open a European subsidiary in either London or Frankfurt, if there are direct flights to Frankfurt but none to London, and if the company is otherwise indifferent between the two cities, then the direct air link will tip the scales in Frankfurt’s favour.
But given that it is not that difficult to get from Frankfurt to London, it would have to be a close call indeed. A company that has a clear preference for London over Frankfurt will still open its subsidiary in London, and use Frankfurt only as a gateway to get there. In that case, Frankfurt’s good connectivity would be a boon to London rather than a threat. The global racers are not oblivious to this mechanism. They contend, after all, that other British cities reap spill-over benefits from increased activity at Heathrow, rather than worrying that these other cities may be losing the ‘national race’.
Even if it is for the wrong reasons, the global racers ultimately come to the right conclusion: that we need a much more liberal approach to airport capacity expansion. But why not come to the right conclusion for the right reason, and defend airport expansion on the grounds that it makes good economic sense? We are not in a global race with anyone, but being fast and fit has advantages of its own.