July 15th 2013
Stop the mess: we need an economic development reset!
I recently participated in a round table debate on growth, with northern business leaders in Manchester. Inevitably, the key vehicle for local economic growth came up – local enterprise partnerships (Leps). Starting with a few shakes of the head and the odd raised eyebrow, that bit of the debate was summed up by one participant who said: ‘I am not sure Leps are fit for purpose in the drive for local economic recovery’. He was understating it, but spot on. They are many different types of Leps, but overall, we have an institutional and functional mess. Perhaps an economic ‘Eton’ mess.
In the recent Smith Institute/Regional Studies Association publication, a collection of essays revealed how, after three years, with great intentions, the potential of Leps remains in doubt, and is weakening the prime minister’s stated aim for Britain to start winning the ‘global race’. Indeed, the essay from a team at the Centre for Urban and Regional Development Studies (CURDS) at University of Newcastle, who undertook a survey of Leps, stated ‘as a way of organising the institutional arrangements for economic development, the Leps in England look small and seriously underpowered for the task in an international context’.
Meanwhile, far too little is being done to address the systemic economic problems and social divides. The dominance of London, the south east of England and financial sectors continues unchecked. Even the good stuff, like the long overdue, pro-regional city policies such as city deals, could be seen as merely bolstering cities which have decent prospects anyway. Non-metropolitan areas are feeling more and more cut adrift.
No. It has to be said. Economic development in England is broadly failing. It’s a series of half-hearted efforts, from a coalition which deep down does not seem to wholeheartedly believe in economic development, which – if truth be told – is fundamentally Keynesian.
But the messiness continues. A few weeks ago, we saw the spending review and the disappointing details of the single local growth fund. The £2bn of single local growth funding annually from 2015 is meagre, compared to Lord Heseltine’s review, which proposed £49bn over four years. Also a few weeks ago, Nick Clegg announced the latest means of putting some weight behind economic development, when he announced a Whitehall cabinet committee for local growth, as a means of breaking ‘down the silos that exist’ in Whitehall. This seems to add further muddle to a messy set of economic institutions which are making up for their lack of heft and muscle with chatter.
But there can be another way. We can make the best of these Leps. In our Smith Institute essay, we argued for a progressive ‘place based’ economic development. In our recent summit we argued for an ‘economy for all’. Economic development needs to become more coordinated, more embedded in ‘whole place’ principles, where the public economy of local services and the social economy sit alongside commercial economy. Public services and civil economy are inputs into place and wider economic success. We need a reset.
- Aim for a progressive economic development. We must aim for business success and private gain with social justice. They are not mutually exclusive.
- Give local government a stronger role. The real truth of the matter is that local economic development in England will only makes sense when local government makes sense of it.
- Converge economic and social growth. It is evident from the recent fairness and poverty commissions and work in local authorities around social inclusion that there is need to match economic development with social growth.
- Create a statutory duty or function around economic development
- Restate elected members as key place leaders not just representatives of councils. Elected members effectively have a stewardship role when it comes to economic development, influencing priorities, engaging with strategists, and fostering and scrutinising delivery activities. There is therefore a key democratic accountability role for local elected members when it comes to the Leps.
- Stop the horsetrading between Whitehall and town hall and process: Devolve! Whitehall holds all the cards. We must realise the promise that the treasury will relax its grip of central departments and will devolve budgets and competencies to local government.
Without this reset, government economic growth objectives and progressive social outcomes of growth will not be realised. Indeed, without this many of our local economies will remain bedevilled by the problems which have plagued them for a generation.
I’ve written a few words on the subject in response – they conclude:
But growth – and let’s be clear, it’s growth that the north needs not some sort of steady-state economy – will not come from this action but from an environment that celebrates business and enterprise however it is organised. From a society that finally escapes from the belief that some grand bloke in a top hat will arrive and give us all jobs for life.
If the north is to have a successful economic development strategy – or strategies – it has to focus relentlessly on the private sector and eschew the temptation to use regeneration plans to save the planet, eliminate poverty or create some mythical ‘fairer’ society.
Imagine ‘Freeport Manchester’ – a low tax, low regulation economy supported by local government and featuring investment in skills, education and business creation. A place focused on science and engineering, on export and exchange – a sort of Singapore on the Ship Canal. Wouldn’t that be a better ambition?
The rest of the piece is here:
http://theviewfromcullingworth.blogspot.co.uk/2013/07/singapore-on-ship-canal-why-its-economy.html
I’d agree with Simon that the only real way forward is by creating a market driven boost to the economy. The amount national (& certainly local) governments can devote to any regeneration would be negligible in the context of the problem. Also government attempts at manipulating growth have a dismal track record.
But why not go the whole hog – give northern regions a separate currency, as their separate economic development would suggest – let it fluctuate (no doubt fall in the short term) against sterling and let the market drag jobs & businesses back into the newly competitive north. The north being tied to the same currency as the south makes no more economic sense than Greece being tied to the same currency as Germany – death by a thousand cuts & a basket case northern economy await whilst ironically the south becomes overcrowded & ultimately uncompetitive itself.
Thanks for comments. Both Simon and Keith make suggestions, which are the the kind of things we should be exploring as part of any reset. But not only is economic development convention in control, it seems deaf, to new ideas.
Hefty market driven boosts should be considered, as should ideas around circular economies and steady state. There is so much more we could be considering within an economic development menu. The staple fare on offer is just not good enough.
http://newstartmag.co.uk/your-blogs/time-to-reset-economic-development/
I seems to me that Simon’s proposals merely take us back to pre 1900 AD and in fact this kind of overemphasis on the private sector is what we have had since 1989 and look at the mess we are in.
If we redistribute wealth, with some emphasis on renewable energy, we can create the demand from which jobs and a sane society can develop over time. The economic system is not a natural product, it is something created by human society for a civilised society. All the talk about business and enterprise is merely a scheme to justify wealth for the fat cats and some crumbs for their toadies.
In a competitive economic system only the small percentage at the top win and capitalism has been since its inception subject to crises. Look at the statistics on incomes.
In a cooperative society we can all win.
Fascinating stuff.
Even if a “relentless focus on the private sector” sounds like a favourite Tory strapline to go alongside “the global race”, to focus on the private sector needn’t be mutually exclusive from a market economy that WORKS for all of society. If we’re ever to make economies work, we need to unite the left and right labelled rhetoric where the market dominates on one side and society dominates on the other, while proponents of each view the other with disdain. We desperately need to work out how and where the two intersect. At the moment we really seem to be struggling with this. Just these few posts here already appear on opposite sides of said rhetoric, but they needn’t be.
One of the unloved heroes of socio-economic history, Karl Polanyi, spotted a long time ago that once “the Great Transformation” had led to markets organising society rather than society organising markets, trouble was never far away. How right he was! He observed that the state needed a firm hand to manage this and how social protection was just such a response to the unwanted consequences of the market led society. Unfortunately, history across the world shows how the state’s firm hand has vacillated wildly from an iron fist to a limp fish with inevitable consequences. One assumes that markets will continue to organise society rather than the other way around (that particular genie is long out of the bottle!) but in accepting this, the focus must first and foremost be on market outcomes that are transparent, fair and equitable. Not opaque and unfathomable (financial markets), driven by vested interests (corporate lobbying), and exclusive to only sections of society. Neil’s original ED reset blog sets out what this can mean in policy terms, but it’s the means and mechanisms and the will to deliver them that seem so illusive at the moment. I share his frustration.