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The blight of the visitor economy

One of the large funded projects that I have been involved in over the last few years concerns regional equity (in part). Our planning involves the completion of a new book (to be published sometime 2019) on the way in which regional development has become biased to the economic settlement (where jobs are created) at the expense of the social settlement (where people live). This might sound reasonable until you realise that it is another aspect of the way in which governments have abandoned their remit to ensure general prosperity, and have, instead, ‘allowed the market to work’ – which is neoliberal code for tilting the playing field in favour of corporations and global capital. One of the more recent neoliberal ruses in this context, that undermine the lived experience of local residents

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One of the large funded projects that I have been involved in over the last few years concerns regional equity (in part). Our planning involves the completion of a new book (to be published sometime 2019) on the way in which regional development has become biased to the economic settlement (where jobs are created) at the expense of the social settlement (where people live). This might sound reasonable until you realise that it is another aspect of the way in which governments have abandoned their remit to ensure general prosperity, and have, instead, ‘allowed the market to work’ – which is neoliberal code for tilting the playing field in favour of corporations and global capital. One of the more recent neoliberal ruses in this context, that undermine the lived experience of local residents and boost the profits of large corporations is the concept of the ‘visitor economy’, which is the new buzzword for Tourist-led growth. Governments who claim they have run out of money are quick to hand out massive subsidies to large-scale events to promote the ‘visitor economy’. The same governments also subvert their own planning rules, encourage multi-national corporations to exploit loopholes in labour laws to cut wages and conditions, and privatise valuable public assets to ensure corporations can extract as much profit from activities as possible. Local residents’ rights are trampled in this process as corporations turn their suburbs into ‘global playgrounds’ while pocketing massive public subsidies into the bargain.

Case Study: Newcastle, Australia

By way of context, the Supercars is a Australian motor car racing series. I pass no judgement on whether people should be allowed to engage in these activities. That is not the point.

The cars are based on “road-going, four-door saloon cars”, which allows the fans to feel as they are one step away from being car racing legends themselves, despite considerable modification to the racing vehicles to allow for the speeds reached by the standardised 5 litre, V8 non-turbo category.

The series moves around the nation staging races on traditional racing circuits and also street circuits.

It is the latter that introduce controversy.

I won’t go into detail but in November 2017, Newcastle hosted the series after other citizens in other cities objected to their local authorities trying to woo the race to their towns.

The Newcastle City Council didn’t care about what the local citizens thought about the race and pursued the franchise in earnest. We still don’t know the full public subsidy although there is a promised audit coming – and pigs might fly!.

This graphic shows the race circuit, which was in the inner city area, where people live (including me, although my house was outside the circuit by a distance).

I have placed some red crosses and a line to signify certain aspects.

The blight of the visitor economy

The local area was in chaos for months – roads closed, new road surfaces laid, widened, etc to accommodate the race. Where it says “road widening” that largely amounted to a permanent retrenchment in our city parkland.

A significant part of our main foreshore park was dug up and concrete laid to act as the pit lanes (red line). Another smaller park near my favourite beach was closed and a hairpin bend road was laid (red cross) – denoted “new road”.

The circuit went within a metre of resident front doors in one section (red cross) and the noise was multiples above what the health authorities deem to be safe.

Local citizens were prevented from accessing beaches, parks, normal running areas, recreational areas for months while the corporation running the show took control of our city under the heavy subsidy from state and local government (our taxes!).

The corporate owners of the event apparently imported catering and security guards from Sydney, reducing the capacity of local firms to share in the profits.

Local firms were also damaged because of the extended period the streets were blocked and during the actual three-day event.

No compensation was granted to the local residents who for months could not park near their homes and had security guards vetting their movements in and out of their houses and streets.

I was chased several times by security guards when I jumped their barriers on my morning run around the beaches. The beaches are among Australia’s best East Coast resources and free access to them was hampered by fences, guards, and threats of prosecution.

We still don’t know the full extent of the local impact (good or bad) but as it stands it was a shocking abuse of the rights of local residents.

Effectively a corporation took control of our inner city for some months at the behest of the council and turned it into a large profit-making arena, subsidised heavily by government and the endurance of local citizens.

It was lauded by the Tourism sector as a grand success but for the local residents it was a massive disaster. The corporation has a contract to run the race in our town for 5 years or so.

Following the car race, the boss of the local Tourism lobby group – Tourism Hunter – waxed lyrical about turning Newcastle into a “visitor economy” and claimed the car race was a “giant step” for our city.

He said:

People are starting to see the significance of events … and the emergence of the visitor economy. That is really, really satisfying. A lot of people in our region have been harping about what tourism can do. This is one of the events. It doesn’t matter if it is Supercars. It is how we have set ourselves up.

The people mentioned did not include the vast majority of local residents who were implacably opposed to the event being staged within a metre of their living rooms and our streets being inaccessible for months, not to mention the noise and people invasion that came with the actual event.

In this article (November 24, 2017) – Tourism leader: Newcastle could be a “global playground” – the local Tourism boss is quoted as saying that Newcastle should become:

… a global playground.

He wants to use the local area with its beaches etc to stage a “bevy of events” irrespective of the fact that this is where people live.

He wants 400,000 visitors to come at weekends to the ‘playground’.

To make it easier to push these events through the ‘democratic’ process his solution is simple – abandon the democratic process.

He advocates that “Newcastle’s foreshore from Nobbys lighthouse all the way to Wickham” (that is, our entire inner city area) be taken out of the hands of the local council and to be managed by a private authority.

That will reduce obviously disenfranchise the citizens even further.

We already have a Hunter Development Authority, which was responsible for tearing up our rail line (truncating it out some kilometres from the city centre) to free up the rail corridor for private land developers. That decision has created a feeding frenzy as the property developers jockey to get hold of the valuable land.

Newcastle is a mining town and the only land that is not subject to mining subsidence is the rail corridor because mine shafts were prohibited from crossing it. That reduces the costs of foundation work and makes the development process more profitable.

Never mind that local citizens relied on the train service.

Unfortunately, our local experience is being replicated the world over.

Case study: Porto, Portugal

A few years ago (2015), I was visiting Porto, the northern capital of Portugal with a population of 216,405 thousand people (2015) down, by the way from 237,591 (2011). The wider region contains around 1.4 million people.

I wrote about that visit in these two blogs:

1. The ‘worst tour’ in the world (September 4, 2015).

2. My response to the Mayor of Porto (September 8, 2015).

Porto is held out as one of “the major urban areas of Southwestern Europe.” But it disintegrated after the GFC as an urban centre with an extraordinary number of derelict buildings and many shops closed as austerity ate into incomes and spending.

When I was there I saw decaying buildings everywhere some with for sale signs on the front. The urban infrastructure was falling apart – the main market was being held up with scaffolding and weeds overtake sporting arenas.

In 2014, it was estimated that there were already “70,000 buildings … derelict in Porto and entire shopping centres have had to close”.

In many respects, it looked like a city in the poorest nations rather than being part of Europe. Around a third of the inner city population had left as a result of lack of opportunities following the crisis.

A large number of people in the greater urban area have left. The mobile population are dominated by the young and the educated with the skills leaving behind an elderly population.

Despite the abandoned buildings there is widespread shortage of cheap housing in the city.

The owners have little incentive to do anything about their abandoned buildings. They are waiting for the inevitable entry of Russians, Chinese and even people from say London, who will move in an gentrify the city by buying up these places.

There has also been privatisation madness. The bailout program imposed on Portugal by the EU and the IMF included a number of forced privatisations.

The postal service was among the ‘profitable’ state services that were sold to private capital for well below its worth.

The old main postal building in Porto was sold to a hotel chain.

And the promotion of the ‘visitor economy’ has significantly damaged the poorer Porto residents.

The Tourist Industry though thinks Porto is booming. Representative is this article (November 25, 2017) – Why Porto, Portugal is Europe’s best destination – which reports that tourist numbers rose by 13 per cent in 2016.

Tourism is now major source of income in Porto as its industrial base has declined. There have been many concessions made by the government to the hotel industry.

Porto hotel owners (many of them transnational firms) have been given millions from the bailout funds to develop their businesses.

The old post office building facade was kept and a new concrete shell was constructed to accommodate the new hotel.

The growing number of hotels have increasingly abandoned the ‘contract’ employment model which requires them to pay their workers at least the minimum wage.

Instead, they are hire workers as independent contractors and some of these workers are paid around 2.80 euros per hour, well below the minimum wage.

The elites claimed that austerity hadn’t led to a sharp cut in the minimum wage in Portugal, as it did, for example in Greece, but forget to mention the shift in legal status of the workforce off ‘contract’ or permanent status onto independent contractor status.

Further, the government has pressured citizens into leaving certain residential areas (particularly along the river) so that private developers can reap huge profits.

This is the urban clearance phenomena. The insidious urban clearances of the low income and poor residents to make way for large hotel developments, which are heavily subsidised from the bailout money, has lead to several housing areas being bulldozed.

There are a number of low income houses along the river banks, which rise sharply on either side. On the side of the old city (North), a number of houses are being cleared and hotels built.

The government in some cases has pushed the roofing in so that the buildings become uninhabitable. There is little solution offered to the previous residents who are poor and often without work.

This is another example, where the ‘visitor economy’ undermines the quality of life for local residents and creates low paid, precarious jobs.

As an aside, a recent health study (March 6, 2017) – Impact of the global financial crisis on low birth weight in Portugal: a time-trend analysis – found a statistically significant jump in LBW in Portugal since the GFC and concluded:

The increasing risk in LBW was concomitant with declining birth rates and with worst macroeconomic indicators, such as an increased unemployment and a deceleration in gross domestic product (GDP) growth rate. There was a reduction in government expenditure on health as a proportion of GDP, percentage expenditure of social protection on family/children support and for sickness or healthcare.

The Visitor Economy – just another neoliberal ruse

There have been many neoliberal ruses developing over the last several decades:

1. Social entrepreneurship – alleged that governments could no longer afford to pay for welfare services and income support and that is what up to private charities to fill the gap. But they lacked funds so the solution was for these charities to become ‘commercially’ oriented and generate cash through entrepreneurial ventures.

Please read my blog – Social entrepreneurship … another neo-liberal denial (November 11, 2009

2. New Regionalism – alleged that the nation-state was no longer relevant in the global world and ‘the region’ is now the “crucible” (to use the words of British regional scientist John Lovering) of economic development and should be the prime focus of economic policy, which should concentrate on deregulation and providing export incentives.

In this way, the claim is that regions have now usurped the nation state as the “sites of successful economic organisation” (Scott and Storper’s words) because supply chains (in the post Fordist era) have become more specialised and flexible given the need to deal with uncertain demand conditions.

While many criticisms can be levelled at New Regionalism, its major weakness is that perpetuates the notion that regions can entirely escape the vicissitudes of the national business cycle through reliance on a combination of foreign direct investment and export revenue.

It is a different spin (a variation) on the “business cycle is dead” notion and amounts to a denial that macroeconomic policy – that is, at the national level – can be an effective response to global trends that penetrate via the supply chains defined by trade patterns to the local region.

New Regionalism thus supports neo-liberal claims that fiscal and monetary policy is impotent and, in turn, it constructs mass unemployment as an individual phenomenon.

Please read my blog – Davos – an exercise in denial not solutions (January 26, 2012) – for more discussion on this point.

3. Corporate Social Responsibility (CSR) – whereby firms do untold damage to the environment, communities, etc and then apparently achieve salvation by sponsoring some local event or similar.

4. Volunteerism – the eulogising of people doing tasks for free when in the past the tasks were paid work and often help to generate private profit for capitalist ventures.

In other words, we now con people into feeling good about providing free labour to capital. The ultimate wage cut!

I am at present working on a series of blogs about this neoliberal syndrome. Stay tuned.

The concept of the visitor economy is another of these ruses designed to advance the interests of capital and diminish the lived experience of citizens.

In this case, it is a sort of divide-and-conquer strategy where one cohort of citizens is used to usurp the rights of others to advance private profit.

In Newcastle’s case, the city was invaded by thousands of motor car enthusiasts who drank a lot of beer and bought a lot of racing paraphenalia (exhorbitant prices for caps, T-shirts, etc) but would have had no understanding of the way their ‘playground’ undermined the lived experience of the local residents for most of 2017.

In the commentary Tourism: The Good, the Bad and the Sinner? (in Singh, T.V. (2015) Challenges in Tourism Research, Channel View Publications), tourism academic Jim Macbeth questions the language in the combination of the terms ‘visitor’ and ‘economy’, where the use of the latter term:

… shapes our discourse in a way that is counterproductive to sustainable communities, even to sustainable tourism, because the economic factors are but one fact.

By considering tourism to be about ‘economy’, the focus narrows and the bias is towards the prevailing corporate model of private profit generation, low-paid wages, and an abrogration of citizens rights as residents.

As one commentator offered (quoted by Macbeth) – it all depends on “what kind of economy or economics”:

… the real issue issue is neoliberalism which has reified market economics as the arbiter for all value. I see economy from the old root word suggested as the management of the household, which I would translate to well-being and family thriving. Economics are ultimately about exchange which makes humans flourish so the focus shouldn’t be economic growth for the sake of growth but actually ensuring we make the world a better place. Unfortunately our current economic paradigm does the opposite of this …

I consider the term visitor economy a symptom of this problem and and in attempt to use it in a context of talking about making industry, government and tourists more ‘responsible’ is just a sideshow much like CSR and pro-poor tourism …

The visitor economy idea is symptomatic of skew(ed) … thinking that comes from worshipping the false god of tourism as economic saviour. Tourism that fits in with local communities rather than invades them is the wave of the future. We need more critical thinking than just accepting industry-driven terms.

In the same way that the other ruses noted above make false assumptions about the capacities of governments and the benefits that unfettered markets can bring, the concept of a ‘visitor economy’ is riddled with these misunderstandings.

Many of the major contested areas of public debate are played out in the ‘visitor economy’ space.

1. Corporate welfare – huge handouts are justified to stage events with little followup cost-benefit analysis being done. At the same time, governments claim they have no money left to fund income support for the unemployed and fragile (sick, aged, etc).

2. Wages – the proponents of the ‘visitor economy’ concept often claim that regions have to become ‘more competitive’ as destinations, which is code for having to cut wages and conditions to make it more profitable for the event organisers.

3. Planning rules – are usually subverted to fast-track events at the expense of the environmental and social space.

4. Environmental protection rules – are subverted. In the case of the Newcastle car race, the organisers continually claimed they were abiding by all existing rules. Except, it was pointed out that the State government had exempted them from the major environmental and health rules (noise etc).

5. Quality of employment – volunteers and contracted labour are used extensively to cut costs. The vast majority of jobs are created in the low-paid, precarious areas of the labour market (cafés, restaurants, takeaway food services, retail services, and accommodation).

These jobs provide limited if any security and are extensively casualised with no superannuation allowances etc.

6. Land use compromises – the use of public spaces for commercial purposes is increasing. This is particularly so in areas we previously considered to be worthy of protection – for example, city parks, green spaces, national parks.

We considered these areas to be places where citizens could enjoy recreational activities that did not damage the natural amenity.

Increasingly, these spaces are considered arenas for sponsored events, user pays entry and state subsidy to commercial firms engaged in exploiting the spaces for private profit.

This quote from an architect reported in the Financial Times article (November 14, 2017) – Regeneration in Lisbon and Porto looks back to create the future – is worth considering:

We have to think very carefully about how we rehabilitate our city centres. If we allow tourism to take over, they will lose all the life and character that draws people to them.


Local suburbs should never be considered ‘global playgrounds’. They are where people live and have families and enjoy recreation.

Neoliberalism has increasingly subverted the social settlement to the needs of the ‘economy’, which means to enhance the profits of the corporate sector at the expense of the lived experience of the citizens.

The ‘visitor economy’ concept is another one of the ways in which this subversion is occurring.

A progressive response is to empower citizens with local institutional support frameworks to resist these impositions.

It also means that we should understand our own role as consumers. Before we purchase a ticket to an event we should take some time to reflect on what the impact of the event might be on local residents, the environment etc.

These incursions which damage local residents can only succeed if consumers elsewhere support them.

MMT University Logo competition

I am launching a competition among budding graphical designers out there to design a logo and branding for the MMT University, which we hope will start offering courses in October 2018.

The prize for the best logo will be personal status only and the knowledge that you are helping a worthwhile (not-for-profit) endeavour.

The conditions are simple.

Submit your design to me via E-mail.

A small group of unnamed panelists will select the preferred logo. We might not select any of those submitted.

It should be predominantly blue in colour scheme. It should include a stand-alone logo and a banner to head the WWW presence.

By submitting it you forgo any commercial rights to the logo and branding. In turn, we will only use the work for the MMT University initiative. It will be a truly open source contribution.

The contest closes at the end of March 2018.

That is enough for today!

(c) Copyright 2018 William Mitchell. All Rights Reserved.

Bill Mitchell
Bill Mitchell is a Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW, Australia. He is also a professional musician and plays guitar with the Melbourne Reggae-Dub band – Pressure Drop. The band was popular around the live music scene in Melbourne in the late 1970s and early 1980s. The band reformed in late 2010.

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