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Growth alone is not the answer

Confucius said that ‘Money is round and it rolls away’.  Well over the last year, it has certainly rolled away from many of places.  No growth, stalled development, job losses, growing inequality and failing town centres are a feature of our local economies.

Throughout the year, local policy action to address this woeful state of affairs, have been hitched firmly to a return to economic growth.  Initially, the government was quick (hasty?) – getting rid of economic development agencies like the RDA’s, programmes of support like the Future Jobs Fund and Grants to Business investment, and apparently rejecting the notion of significant stimulus, and an interventionist ‘regeneration’.  The government gave the impression that it was merely returning to the mantras of the 80’s, and all you needed for economic growth was for government and the public sector to ‘get out of the way’, reducing planning regulations and tax breaks through enterprise zones.  Indeed, I dubbed this crisis – ‘voodoo economic development’, believing this approach had echoes of the free-market Reaganomics of the 80’s.

However, it would appear, that over the course of the year, the government has come back from the brink of the sorcery, and directly responded to a growing crisis, with more locally channelled resources.  The Regional Growth fund (3 rounds and extra £1bn announced in the Autumn statement), Youth contract – to help the record level of youth unemployed, and a ‘growing places’ investment fund, to stimulate local economies, all suggest that Keynesian type stimulus is not complete anathema to the government.

Nevertheless, the situation remains very serious, unprecedented levels of public sector cuts and much reduced spending compared to the good old days of unsustainable public sector largesse.  Indeed, whilst this new found interest in some stimulus is welcome, in many of the poorer locations, it lacks significant heft to make much of a difference, to the decades long legacy of economic failure.

There has been much talk of localism, reflected in the Localism act, and there has been much talk of local growth.  But there has been less talk about economic localism.  However, it does now appear to be making some progress, albeit at the scale of cities and Local Enterprise Partnerships (LEPS).

Many leaders of our major cities, whilst worrying about the plight of their cities over the coming year, will gain some solace from the possibility of more decentralised powers and resources from Whitehall.   The new ‘city deals’ appear to be a major plank of the Deputy Prime Minister’s remit and interests, and his work with Greg Clark, the Minister for cities, potentially heralds in a ‘once in a generation’ opportunity for cities.  Indeed, these proposals alongside a growing role for LEPs, represents significant hope for an accelerated economic devolution and weakening of the Whitehall centralist culture.

Overall though, the policies, locally and nationally, are compromised by the structural deficit.  On the one hand – we need to stimulate growth thus reduce the deficit from the increase tax revenues and falling unemployment.  Whilst on the other, we need to reduce spending, and thus not increase the deficit in the first place. Indeed as Keynes would say we are ‘one equation short’.  Namely how do we get growth without dramatically increasing public spending to get it.

I also believe that an alternative local economics is growing, one which is much more local, more environmentally aware and more in tune with the need to create an economy which is both health and well being producing.

A small but growing band of policy makers, practitioners as well as local communities and people are acknowledging the limits to a crude capitalism, materialism, and an overreliance on public spending and are seeking local economic alternatives.  In affluent parts of the country some are increasingly acknowledging that growth has created problems of overheating and weakening the local identity of towns and villages.  In poorer parts of the country many know that even in the good times there was often too little growth, and even when they did get it, it either failed to trickle down to the poorest or did not tackle the systemic issues.

There is an appreciation that there could be a future where local economies: contribute to making people happier and less likely to get ill; which nurture and protect the environment; support artistic and cultural richness, create a good or big society and above all make places resilient to change.

As a citizen, father and mortgage payer, this year has been a real worry.  As an economic development policy professional the year has been exasperating.  The narrow focus on growth, the growing social and economic hardship and the 80’s thinking and policy did not fill me with hope.  However, there has been movement from the simple growth philosophy, and I would hope the year ahead sees an acceleration of this trend.  Furthermore, I would hope to see a growth and acceptance of alternative thinking in policy circles, one which builds an acceleration of place resilience and economy which is people and planet focussed.  In particular I would hope to see:

  1. A true permissive national approach.  We must see a permissive localist culture permeating the Treasury and the large spending departments, such as DWP.
  2. Better and more local economic strategies.  Each local area is different and must seek to find their own comparative advantage and their own way of maximising economic activity for social and environmental benefit.  Strategies which seek to attain growth are fine (for the short term), but strategies must also recognise the need to build in local economic resilience, steady state, no growth, and managing decline.
  3. Local and regional banks and new forms of social financing.  We must move beyond crude notion of UK plc, dominated by UK policy which overly protects UK financial sector and build new institutions and structures of local financial capital.
  4. LEPS must look at wider place agenda.  LEPs, must look beyond business growth and look to a set broader local conditions which create places success.  This means they need to work with community and health stakeholders much more
  5. A revolution in local public procurement.  Local public procurement of goods and services must sweat every pound, ensuring it looks less at short term efficiencies and much more about addressing local poverty, employment, environmental and social benefits.

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