The Future Calls for Inclusive Growth – Part 1

This is part one of two essays on the future of Wales’ economy. Part two, looking at Wales’ priorities for sustainable growth, is available here. This is an amended article that was originally featured by the RSA.

You can register for the IWA’s Rethinking Wales: Business after Covid-19 event with Ken Skates MS here.

Wales needs an economic renewal strategy for the post Covid-19, post-Brexit world – but so does the UK.

An economic strategy cannot stand alone; it must drive a wider vision. The emerging Welsh vision includes renewal based on economic, social and environmental justice. That should have merit beyond Wales. So how could the Welsh commitment be developed as a wider national coherent programme for renewal?

Four great upheavals currently shape our future and our daily lives: globalisation, Brexit, Covid-19, and the implications of climate change and the existential threats to the natural world. To build back better we must learn lessons from each of them.

None of them are indiscriminate. All affect nearly everyone (except perhaps a wealthy and powerful elite) but bear most heavily upon the poor and the vulnerable and accentuate huge pre-existing inequalities.

Brexit revealed profound levels of alienation and disempowerment: material inequalities have been compounded by a growing loss of agency, the ability to influence change that affects personal and community wellbeing seems to be beyond reach.

Maslow’s hierarchy dominates the Covid-19 story. The very basics of everyday life – shelter, food, health, care – define wellbeing. They must be more equally available and the inequalities besetting those who provide them must be addressed.

To these must be added the implications of the digitalised Fourth Industrial Revolution. The Brown report highlights the necessity of addressing the issues, including differential benefits and disbenefits, through a comprehensive strategy. Wales must not lock its response within isolated pockets of action.

The lessons to be learned point to three core principles: inclusivity, agency and sustainability.

Towards A Vision for the Future Wales

The vision for Wales need not – must not – be complex. It must be clear, encompassing, yet easily communicated. It must gain buy-in from the public, cut across silos in government and the public sector, and have credence in the private and third sectors.

It must also be our ‘USP’; our message to the world that we stand for something unique not in its individual components but in its coherence, ambition and delivery. It must shout out loud that Wales is a desirable place to live, work and visit. In short, Wales must commit wholeheartedly to an inclusive vision that:

• Puts wellbeing as the overriding national goal;
• Creates a more equal and just society;
• Expands people’s agency and empowerment – the opportunity to have a voice, to be listened to, and to shape the quality of their personal lives and of the communities in which they live;
• Meets the challenges of the fourth industrial revolution with a comprehensive digitalisation strategy not isolated pockets of action;
• Is framed by a Comprehensive Green Agenda designed to mobilise natural and technological solutions to all man-made threats to the environment and the eco-systems on which human life depends; and within this
• Embeds a Green Growth Strategy that guides all economic development policies and practices and seizes the abundant opportunities for green economic growth, including digitalisation and the fourth industrial revolution, the generation of intellectual property rights and the capability to export green technologies and services

Stimulated by its membership of the Wellbeing Economy Governments Partnership which the Welsh Government has joined, wellbeing must be broadly envisaged – reaching well beyond prosperity for its own sake.

The Wellbeing of Future Generations Act provides the framework and the Future Generations Commissioner’s first report identifies what can and should be done. But what we measure becomes that which we value. In Wales we need to develop even more ambitious measures of progress on wellbeing, including measures of agency and engagement.

Delivering Inclusive Economic Growth

To be the bedrock of wellbeing, inclusive growth has to be pursued nationally, by region, but also at the local, place-based level. With Covid-19 the Foundational Economy’s time has come. It pinpoints the significance of local economies and the ‘mundane’ production and consumption of the goods and services that underpin daily life.

It posits an alternative model of economic development and substitutes local wellbeing for the long-standing focus on growing high-skill, high-tech jobs in sectors that all countries are competitively seeking to maximise, better to close the gross value added (GVA) gap.  Wellbeing becomes the heart of economic policy not a useful by-product of economic growth.

“Boosting high-end jobs without improving the local skills base can simply lead to an influx of skilled workers and distort the local housing market.”

For now – and it could change with a universal basic income or universal basic services – jobs are the primary safeguard against poverty and material inequalities. But the focus must be on the quality of those jobs, including in the foundational economy – for example in the care and food sectors.

An equitable distribution of more good jobs would greatly reduce poverty and the multiple social ills that accompany it. That single achievement would transform inequalities in wellbeing.

To signal its ambition Wales needs to adopt a good job in every household (of working age), as the ‘North Star’ of economic development; not as an unachievable target, but as a guiding principle against which to test policy and practice.

The primary measures of success for inclusive economic development in Wales should be:

• An increase in the number and a more equal distribution of good quality jobs;
• A reduction in place-based inequalities in net disposable household income (not GVA).

The foundational economy has to be central to attaining those goals. While it is necessary, it is not sufficient and cannot stand alone. Pursued in isolation a foundational economy approach could exacerbate not reduce some place-based economic disadvantages.

The pre-existing social and economic capital of localities varies greatly (witness the gulf between Cardiff and Blaenau Gwent, where life expectancy is the lowest in the UK); active ‘levelling up’ is essential if a foundational economy strategy is to reduce place-based inequalities.

A country’s success in tradable services – the focus of traditional economic development – impacts on the foundational economy: ambitious national or regional projects and programmes can generate resources and stimulus locally. But programmes that do not land well can cause local collateral damage. For example, boosting high-end jobs without improving the local skills base can simply lead to an influx of skilled workers and distort the local housing market.

Successful implementation is the hardest part of policy making (witness Covid-19 test and trace). The most effective policies anticipate implementation hurdles and unintended consequences. An integrated economic strategy requires strong cross government working.

For example, procurement locally for social gain – the best initial driver of growth in foundational economies – cannot be taken forward in one part of government in isolation. And effective integration of economic development rests upon strong regional economic structures.

“In the 1970s and ‘80s even supporters of the welfare state argued that top down, ‘paternalistic’ public services were unsuited to an era of choice and consumerism.”

These are beginning to emerge in Wales but need to be further strengthened and to be genuinely influential in both shaping national economic strategies and ensuring that they land well locally. The regional economic structure also needs to be fully integrated within structures for wider cross-government joint working at the local level. Systematic decentralisation is essential even in a small country if policies are to land well.

The gross economic inequalities generated by global change and past UK government policies cannot be transformed by a small nation like Wales. The asymmetric, ad hoc and unstable quasi-federal system of governance in the UK leaves Wales with limited and increasingly uncertain powers.

What the Welsh Government can do is rebalance priorities between the models of economic development by:

• Fully integrating its economic development strategies to align national and regional economic development of the more traditional – high value – kind with the promotion of the foundational economy at a local level;
• Improving joint working at the centre but also at the regional and local levels;
• Improving its supply of local knowledge by strengthening and fully utilising regional and local structures to enhance policy development at the centre and ensure policies land well locally; and
• Pro-actively kick-starting growth in the weakest local economies to reduce place-based inequalities (a ‘venture capital’ model of seeking out potential start-ups and growing supply chain capacity). 

Agency

What those who voted leave in the Brexit referendum have to tell us above all is that being left behind is as much about lack of agency as about economic inequalities. ‘Taking back control’ at the UK level rang a bell for many, but a more general sense of disempowerment is palpable.

Faith in government, politicians and representative democracy was under threat well before Brexit, but the referendum was an inappropriate participative disruption within our system of representative democracy. It reduced a complex issue to a false binary choice.

Yet managed properly, forms of participative democracy that expand agency, allied with systematic decentralisation (and a fully federal UK system of governance) may be the best defence of our political system, not a threat.

While true of our formal systems of central and local government, this also applies to the relationship between public services and the public at large. The twentieth century model of public service needs to be transformed.

The necessary creation of mass public services as a response to social ills was located within a vision of public service that asked: ‘What is the matter and we will put it right for you?’ It was well-intentioned but top-down; it did things for and to people not with them and thereby denied agency.

In the 1970s and ‘80s even supporters of the welfare state argued that top down, ‘paternalistic’ public services were unsuited to an era of choice and consumerism. But the proffered solution was of its time: user choice between competing suppliers of public services. Internal markets became the drivers of modernisation and helped legitimise the marketisation and privatisation of public services.

However, that notion of modernisation ignored the innovations, driven by professional values not competition, which had already begun to foster personalisation and user engagement within some public services. Greater agency for the user was gaining ground from within: for example, doctors who prescribed solutions without reference to patient preference and engagement were going out of fashion.

Yet there is a way to go in making our public services more participative. Fundamentally, the question which defined their early growth has to be replaced by a new one: ‘What matters to you and how can we help you to bring that to pass?’.

It is already the guiding mantra for many, not least in the third sector (for example, the National Lottery Community Fund adopted it as the guiding principle of grant-making some years ago) but needs to be systematically entrenched throughout our public services.

To ask the question is often to reveal quite different, sometimes apparently mundane, priorities which official policy can overlook – litter, fly tipping and the location of bus stops, valuing lived experience alongside professional expertise – as well as profound priorities such as human scale planning and development.

Either way, the fundamental shift is to involve people more fully in both co-defining the issues that need to be addressed (what matters) and co-producing the best way to address them.

Participative and co-production approaches are challenging for organisations and government. They require new skills and organisational, political and personal confidence (and humility), but there are examples of great merit.

Ireland has championed citizens’ assemblies to address difficult social and moral questions. The Electoral Reform Society is exploring the role of citizens’ assemblies on a number of fronts. An increasing number of bodies can offer guidance and support.

Systematically promoting engagement and an enhancement of agency is a whole government challenge. Wales needs to champion a variety of means of engagement including:

• Active community consultations, while reducing passive consultations on pre-formed policy proposals;
• Citizens’ commissions and parliaments;
• Active citizen engagement in re-shaping local communities;
• Co-design and co-production of change;
• Participative budgeting; and
• The devolution of many funding decisions to local communities in central and local government and across the public services.

Economic development can play its part. A participative foundational economy can be a force for significant engagement of communities in shaping their own future. More local authorities could engage people in defining a desired pattern of local development. As, for example, has Barking and Havering where local people have been involved in shaping large-scale redevelopment of the borough.

“Mutual and informal community action are powerful agents of bottom-up change and engagement and could play a growing role in the local supply chains of public, private and third sector organisations.”

Historically, parts of the third sector also developed within a top-down model, but that has been changing and in recent years there has been significant growth in highly local, informal or minimally formalised community action.

‘Pop-up’ community action has been a marked feature of the response to Covid-19 and the volunteering demographic has shifted. The NHS appeal for volunteer help was swamped by a supply that exceeded demand, including from many first time younger volunteers.

To nurture and build on highly local community action is not easy. Much of this pop-up activity may only need to be exactly that – episodic – but sustaining some of it could greatly enrich our society.

The Big Society of the Cameron era was irretrievably harnessed to the ideology of the austerity programme but there is a genuine need for even closer links between the statutory, private and third sectors and local communities that build on local strengths and assets.

The foundational economy may be part of the solution: the production and distribution of the necessities of everyday life cannot and should not be seen within the constraints of a public/private dichotomy. Social enterprises and mutuals epitomise this crossover.

Wales has a proud tradition of informal communal action and mutual models of organisation. They must not be cherished in a mental museum of our cultural history; they must be grasped as a much larger part of our way forward.

Mutual and informal community action are powerful agents of bottom-up change and engagement and could play a growing role in the local supply chains of public, private and third sector organisations.

The Welsh foundational economy innovation fund has attracted bids to grow such forms of organisation. Supported by local government and the Welsh Government’s regional structures, the foundational economy could become a more encompassing force for integrating both local economic and social development.

This requires Wales to:

• Make a step change in the growth of mutuals and hybrid organisations that span the apparent divide between public and private and formal and informal models of organisation, while not reproducing Public Private Partnerships;
• Increase innovative joint working across the statutory and third sectors, for example, more NHS sponsorship of third sector hubs within hospital and GP premises to provide one-step shops and expand social prescribing;
• Develop a refreshed, more ambitious, Economic Action Plan, including an expanded Economic Contract, and funding criteria (including within the Wales Development Bank), which overtly recognise and support genuinely socially responsible business models; and
• Create a Kite-Mark (CymryDa/The Greater Good) sponsored by business that champions social responsibility, including personal and group control over the organisation of work and greater support by business for the third sector, especially social enterprises where business acumen and skills are key to sustainability.

This is part one of two essays on the future of Wales’ economy. Part two, looking at Wales’ priorities for sustainable growth, is available here. This is an amended article that was originally featured by the RSA. 

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