Addressing poverty? It’s economic development, stupid!

Derelict Terrace HouseEven having a job is no guarantee you won’t slip into poverty. Recent evidence from New Policy Institute (NPI), commissioned by Joseph Rowntree Foundation (JRF), tells the latest story of poverty in the UK  – ‘in work’ poverty is on the rise.  The story of poverty in the UK is a lengthy complicated volume, with no end in sight.

This problem of in-work poverty reveals a fundamental aspect of our economy – it is badly failing some people. So those tasked with thinking about our economy and developing it (including local enterprise partnerships – Leps) need to be involved in writing a new economic story. With tackling poverty at the forefront

However, for this to happen we will need to question some of the thinking.

Firstly, local economic power is NOT enough on its own.  Some see the solution to our economic woes as resting in the greater powers for cities or local government.  However, demand on public services, is already outstripping local resources and changes to council tax, disadvantage the poor and poorer areas.  Furthermore, the poorer areas have less of a tax base to enjoy the re-localisation of any tax such as business rates.  Poorer areas may well have less wealth than the wealthier areas to redistribute, even if localism gives them power to do it.  Localism which brings more power, but no extra resource, and/or reducing wealth, is of no use to tackling poverty. Indeed it could make the situation worse.

The progressive future is much more about double economic devolution. It is not good enough passing power and responsibility to local areas without more national fairness to begin with. So we require a reform of the prevailing national economic and social policy. We need a significant national economic plan, which spatially stewards the economy away from the existing haves and towards the have-nots.  This requires central action where national economic fairness and inclusion is a priority. This requires a national consciousness, where we are truly in it together.  Only then can we have any hope of a poverty fighting economic localism.

Secondly, traditional thinking around a rising economic tide will NOT lift all boats.  As I have written before, present economic development plans could be seen as voodoo local economic development.  Most historic and present economic development, basically hangs on to the half truth that a growing economy will lift people out of poverty – trickle down.  However, even the good times were not that good for some areas.  We need to do something more progressive with growth, wealth creation, and redistribute in different ways. We need shared leadership of place involving poverty coalitions across public, social and commercial sectors.

Thirdly, reducing poverty is not the outcome of economic growth, it’s part of the solution. I have written before about how growth needs the poorest to consume.  As Joseph Stiglitz argues and I agree, tackling poverty is part of the economic answer and that unless we do something about poverty, then it may be difficult to restore the kind of prosperity we would like.

Our economy needs the poor to not be poor.  Because, low levels of disposable income are reducing local demand. Trickle up economics tells us that the the poorest have a higher propensity to consume.  They will spend a higher proportion of their income, usually locally.  They must start earning and spending. Our businesses (especially our SME’s) need this. This relationship means, we have an irrefutable economic rationale for dealing with this shocking situation as regards poverty. Are Leps listening?

For all the evidence on poverty and talk around how horrific it is, we need action.  Economic development needs to forge a new national economic story, make anti poverty a priority and see fighting poverty as an economic solution.


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Robin Beveridge
Robin Beveridge
11 years ago

There are two distinct types of spatial inequality. One is the local distribution of where the wealthy people choose to live, and where poor people are ‘housed’; the sifting between Moss Side and Chorlton in Manchester, Aigburth and Toxteth in Liverpool, Byker and Jesmond in Newcastle. The second is the structural distribution of opportunity/competitiveness – the north-south divide, but also the widening split between urban and rural areas, the decline of seaside towns etc.
The former type of spatial inequality is – I think – primarily a reflection of the social inequality in society. Create a fairer distribution of wealth (e.g. reduce the gap between top and bottom of the income scales) and many of these local spatial differences will reduce.
The latter type is more about how and where we develop economic capacity. It is more likely to respond to national and regional economic plans etc.
While this is overly simplistic, I think it helps to distinguish between sifting and structural effects.

Jeff Mowatt
Jeff Mowatt
10 years ago

It’s the economic paradigm stupid – Bill Clinton was told:

“Once a nation or government puts people in the position of defending their own lives, or that of family and friends, and they all will die if they do nothing about it, at that point all laws, social contracts and covenants end. Laws, social contracts and covenants define civilization. Without them, there is no civilization at all, there is only the law of the jungle: kill, or be killed. This is where we started, tens of thousands of years ago.

By leaving people in poverty, at risk of their lives due to lack of basic living essentials, we have stepped across the boundary of civilization. We have conceded that these people do not matter, are not important. Allowing them to starve to death, freeze to death, die from deprivation, or simply shooting them, is in the end exactly the same thing. Inflicting or allowing poverty on a group of people or an entire country is a formula for disaster.”

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