Earlier today IPPR launched the interim report of the Commission for Economic Justice. Here’s my quick take on the report and the discussion around the launch.
The basic description of the ‘British economic muddle’ is familiar
While there are no surprises, IPPR and Michael Jacobs have all done us a favour by articulating things so clearly. In a nutshell:
– The economy is no longer raising living standards for a majority of people.
– That poor performance arises from deep, long-term weaknesses, especially:
- World-lagging productivity in many businesses.
- Low investment rate compared to peers, even adjusting for our service bias and even with as a world-leading financial sector.
- Largest percentage current account trade deficit in G7, despite a surplus in trading services.
- Current activity fuelled by growing consumer debt, in part driven by government refusing to borrow even though interest rates are at all-time lows.
- We want public services but we’re not willing to pay for them.
– We face profound challenges and opportunities:
- Brexit – a momentous change in our governance and trading.
- Globalisation – challenge those trade imbalances.
- Older population – proportionately fewer workers to finance pensions and healthcare.
- Technological change – will the gains from automation go to owners, to consumers, to workers?
- Environmental degradation – including the impacts of climate change.
All of this is supported by many graphs and much discussion. Fantastic.
My further sense from the discussion was just how strong the system archetype of ‘success to the successful’ is in the UK. If you own your home (as I do) then your wealth has gone up, and the ladder to join in has been pulled away from the rest. If you’re a productive business then you get the profits to reinvest further – something the weaker companies don’t do. London enjoys the positive feedback loops of being a world-leader, as does Cambridge and Oxford. Rest of the country? Not so much. Well paid or got a cushion of wealth? Then you can take risks with your career by moving or starting your own business. Don’t have that, then you, relatively, fall further back.
Recommendations: too technocratic to be a policy sea change akin to 1940s and 1980s
The report is right that fundamental reforms of this scale have happened twice in the last century: the Attlee government bringing in the Welfare State in 1945; and the Thatcher government overcoming stagflation by pushing free markets and so on.
Both of those were political earthquakes which profoundly realigned what was considered orthodox for the following generation. The recommendations, as they stand, are all good technocratic things to do. But, do they ignite and demonstrate an utter shift in the political economy?
- Put economy on stronger institutional foundations, driving more investment through greater certainty.
- More competitive through industrial strategy, supporting entrepreneurs and shifting financial and corporate governance.
- Wiring the economy for justice, promoting ‘good jobs’, a reformed tax system and spreading wealth more fairly.
Imagine the chant:
“What do we want?”
“What do we want?”
“A strategic approach to industry!”
“What do we want?”
“Justice for All (the weaker of the early Metallic albums)!”
Perhaps I’m being unfair on an interim report for a think tank, rather than the conference speech of the opposition leader. But if your lead-off recommendation is stronger institutions, you know you have an economist writing your report.
IPPR’s Director was very clear at the start that, if you don’t have a vision then change becomes directionless. One the first page of the summary there is a paragraph with a description of the economy we’re aiming for: dynamic, people flourish; better jobs; geographically balanced; economics rewards distributed fairly; decent house; within environmental limits; partnership between business, trade union and government sectors.
That’s quite a laundry list of Guardian-friendly desires. Who can say no to motherhood and apple pie? But also, who is compelled to act with a broad vision with such a technocratic way forward?
What alignment of social forces is realistically available to make this happen?
Which takes us to the substantive problem. I agree with the analysis. I imagine I will agree with the final recommendations. But, what will happen as a result?
I’ve no idea if Director of the Commission, Michael Jacobs, remembers but about a decade ago he gave a talk at the RSA on what made the reform of the 1940s possible (he was speaking about the need for something similar on climate change). His four preconditions:
- intellectual case (back then, Keynes)
- crisis (the aftermath of the WWII)
- public mandate (the Labour landslide)
- elite buy-in (apparently businesses liked the demand support of the Welfare State compared to the free market Great Depression)
Today, the IPPR report (and the work of the Resolution Foundation, plus Tim Jackson’s Prosperity Without Growth and Kate Raworth’s Doughnut Economics) all make for the intellectual case. in the UK, Brexit will upend everything. That provides us with the crisis to take advantage of.
But the public mandate: Is the UK populace for economic justice, or do they want cultural security? It was striking that the two politicians on the stage couldn’t bring themselves to be pro-immigration. Even though more young workers makes us better off, many fear immigration. They blame it for lower wages and weaker public services (rather than, say, global labour markets for the former and austerity for the latter).
The opinion polls imply people are willing to take a financial hit to take back control of the borders. One thing is: we’ll see if that’s true when people take the hit (there’s often a survey gap in, say, willingness to pay extra for ethical products). Another thing: perhaps this is good news. It means n one can argue that economic cost-benefit is the true measure of a decision.
And on elite buy-in: are leading government and business figures One Nation Tories or do they wanting to complete Thatcher’s revolution? The General Election undermined the One Nation Tories on domestic economic policy. Many of the leading Brexiteers seem to want to use leaving the EU to deregulate and open up for more free trade. (The irony is that this reduces people’s control and will quite likely leave many people even further behind. But hey.)
Also, while there are many business people who are for economic regeneration and so on, how many are willing to voluntarily raise wages? Or give up the negotiating advantage of zero hours contracts? The rhetoric is strong but the business case – and evidence of business action – is weak.
So, great content, worry about the theory of change. That worry is something I have with all sustainability and progressive activity – including my own. So, I’m far from having got all that solved. And I’d love to bring my insights on industrial strategy in, and to see if there are ways to move forward without relying on government buy-in.
Could some citizen activity or people-power initiatives start us off. So that, come the next election or the one after that, the social forces are aligned?
Let’s hope. And let’s hope by making that happen.