Month: August 2017

Patterns of Neoliberalisation and Resistance

abuaro01

Professor Jonathan Davies introduces a new paper “Austerity Urbanism: Patterns of Neoliberalisation and Resistance in Six Cities of Spain and the UK”. The paper is co-authored with Ismael Blanco and published in Environment and Planning A. The article is fully open access and can be downloaded at the link above.

The relationship between austerity, neoliberalism and the governance of cities has been the source of intense debate since the 2008 crash. We develop a fresh perspective, through a six-case comparative analysis of austerity urbanism in Spain (Barcelona, Donostia, Lleida and Madrid) and the UK (Cardiff and Leicester).

We begin by looking at a continuum of perspectives on neoliberalism, from thinkers like Perry Anderson who see it as a globalising hegemonic strategy of historically unprecedented influence, to urbanists, who see it as infinitely variegated and even disappearing when studied under a fine-grain analytical lens. Our argument is that if, in the spirit of critical realism, we treat social life as stratified and scaled, then these analytical polarities are not mutually exclusive. Divergence at one level of analysis can underpin convergence at another – and indeed vice-versa.  Convergence and divergence should therefore be understood in relational terms.

Following this intuition, our central argument is – perhaps unsurprisingly – that culturally, politically and economically diverse austerity regimes tend to strengthen neoliberalism in both Spain and the UK.  Urban austerity regimes are far more strongly embedded in UK cities than in Spain, bearing witness to the enduring shadow cast over local politics by the Thatcherite shock of the 1980s.  Yet, in cities where anti-austerity struggles are highly developed, as in Barcelona and Madrid, the potential for urban transformations is both tantalizing and fraught with difficulties.  At the same time, the breadth of regional variation in Spain leads us to follow Patrick Le Gales (2016) in asking where “neoliberalism” begins and ends. Donostia, for example, retains a strong commitment to public welfare, made possible by the relative economic strength and autonomy of the Basque region and the durability of local welfarist traditions across the electoral divide. Hence, while explaining how local varieties of neoliberalism strengthen neoliberalism as a global project, we also recognize limits to the concept and the potential for overcoming it through resistance grounded in urban politics.

Theoretically, we follow a regime approach, developing a heuristic analysis based on Clarence N. Stone’s “iron law”. Stone (2015) states that for any governing regime to succeed, resources must be commensurate with the agenda pursued. This simple formulation provides a helpful lens for bringing our diverse case studies into a meaningful conversation with one another, around the question of what alliances are forged among which actors, mobilizing what resources in pursuit of which goals – and with what limitations?  Applying this lens allows us to develop an inductive comparison around a thematically structured discussion of austerity governance and resistance in our six cities. Through this approach we benchmark the powers and limitations of neoliberal austerity regimes.

We finally consider the implications of our study for conceptualizing neoliberalism and for further developing urban regime analysis in the spirit of Stone’s iron law. The paper concludes with eight propositions to inform future studies of austerity urbanism.  We hope readers find them useful and stimulating.

Jonathan Davies is Director of CURA and Professor of Critical Policy Studies at De Montfort University

How the world’s first Social Impact Bond drained public resources, and why the market model fails forward

abuaro01

In today’s blog, Robert Ogman argues that success stories on the social investment market are hiding inconvenient truths, and require honest rethink about such risky and expensive policy experiments

In 2009, when governments took on enormous debts to rescue the crumbling financial sector, they sought to address the fiscal crisis by slashing funding to the public sector in the turn to austerity. The conservatives called for a “Big Society” to fill the gap for scaled-back social protections, but quickly realising that nothing comes for free, sought to link the resource-weak social sector to capital markets ‘awash with liquidity’ (IMF), through the Cabinet Office’s new “social investment bank”, Big Society Capital. Private surpluses, could be ‘mobilised’ to offset government funding gaps, through loans to civil society groups coping with deepening social crises. In the ‘age of austerity’ (Cameron), the Social Investment Market is a magic bullet: It should offset fiscal problems by securing new pools of capital, address social problems by expanding the social sector, and make capitalism responsible by directing investors towards products with societal benefit. So were the praises sung by the father of venture capitalism, Sir Ronald Cohen, now involved in Big Society Capital, the Social Finance organization, and a host of ‘impact’-oriented initiatives.

Central to this broad policy initiative is the Social Impact Bond, a mechanism to address three interlinked problems, namely, to create ‘inclusive growth’ and ‘shared value’ as a new economic model, to offset public fiscal deficits with private investment, and to ‘solve society’s most intractable social problems’ by expanding preventative services. This experiment was tested in Peterborough as the world’s first SIB, bringing together market, government, and societal actors seeking to ‘break the cycle of reincarceration’. Investors provided £5 million as working capital for organisations, who adapted an anti-recidivism programme by St. Giles Trust , to reduce reconvictions of people released from short-term sentences at the local prison. If it reduced reconviction by 7.5% compared to a control group, the Ministry of Justice anticipated related reductions in its budget. It hoped that lower court, police, prison, and other criminal justice expenses could amount to up to £90m. If the project succeeds, a portion of these savings would be used to repay investors plus dividend. If it missed its mark, investors risked losing their capital. The idea was that this would “transfer the [financial] risk to the investors”, as Social Finance writes.

A central pillar of SIBs is the fiscal argument. As project manager of the Peterborough project and major driver of U.K. SIBs, Social Finance describes as a “precondition of a successful [SIB]”, that the savings are larger than the service intervention costs. In a time of fiscal constraint, the SIBs were meant to ‘do more with less’, downsizing prisons, and in doing so, ‘paying for themselves’. They were sold to the electorate under the mantra of presenting “no risk to the taxpayer”. In fact, without such fiscal pressures, one might ask whether this policy would have gotten off the ground at all, let alone accelerate an international diffusion of nearly 90 projects in 19 countries in the value of £300, according to Social Finance.

The final results for the Peterborough project came in this week achieving a 9% reduction in recidivism among its 2,000 person target group. In their statement, Social Finance praised the reductions in reoffending and the repayment of investors. The Ministry of Justice played the same tune and Gordon Brown praised the project in the same manner. Yet, as advocates were patting themselves on the backs, they were also moving the goal posts, with negative implications for the public. The new storyline neglected any reference to fiscal issues. This covered up the inconvenient truth that the Peterborough project would not pay for itself, as Rand wrote in a report for the Ministry of Justice. Absent savings, investors would effectually be paid through new expenditure, from tax payer dollars in the Ministry of Justice’s budget, and public money from the Big Lottery Fund, who rescued the project with a multi-million pound subsidy. While the project was supposed to allow government to ‘mobilise private capital for public good’, the Peterborough experiment appears to inverse this, compelling the government to “fill the funding gap for UK social impact bonds”, when they fail to create expected savings. This fiasco is just the latest example of a blunders associated with the uncritical approach to market-style governance.

While mistakes are common in policy innovations, there appears little concern to reassess the project. Instead, new efforts are being made to shore up the model despite its problems. Anticipating future failures, the Cabinet Office and the Big Lottery Fund conjured up £60 million of special “outcome funds” to subsidise investor returns when SIBs fail to create anticipated efficiency gains.

But now one really has to ask what the fiscal logic is for these projects. If SIBs were partially designed to help government out of a fiscal jam, now they’re placing more pressure on the budget, simply to pay investor returns on projects they’ve contributed no social value to. One wonders why the government should continue a project meant to reduce fiscal pressure, when it is now increasing expenditure with no added value?

So long as the government continues to cut public resources, and refuses to draw in revenue through taxation of concentrated private wealth, we’ll likely see more of such unhelpful market governance schemes, with attractive language but poor outcomes.

While many supporters of SIBs view them sympathetically, they do so because they would like to see more investment in social protections, more market actor involvement in societally beneficial endeavors, and more private contribution to the rebalancing of public finances. But the Peterborough problems show that joining market governance to ‘public responsibility’ are a weak compromise, they can inhibit these goals, and may produce contradictory results. The shortcomings of the Peterborough pilot require more than a tinkering with existing market governance models, and instead an honest rethinking of broader policy directions, asking how the economy may be more adequately ‘re-embedded’ in structures of public accountability.

Robert Ogman is a member of CURA and a doctoral researcher at the Department of Politics and Public Policy at De Montfort University.

Dissemination Report: Governing in and Against Austerity

abuaro01

We are delighted to publish our dissemination report for the Austerity Governance project. It is titled Governing in and Against Austerity and provides an overview and reports initial findings from our eight case studies of austerity governance in Athens, Baltimore, Barcelona, Dublin, Leicester, Melbourne, Montreal and Nantes.

We warmly welcome comments and feedback, you can download the document on the hyperlink above.

Popular Democracy by Gianpaolo Baiocchi and Ernesto Ganuza

abuaro01

pid_22421

In this post Ernesto Ganuza and Gianpaolo Baiocchi begin our third instalment of CURA’s Book Debates series by outlining the main argument in their recently co-authored book “Popular Democracy: the Paradox of Participation” – where they trace the development of participatory governance, focusing specifically on the paradigmatic process of Participatory Budgeting, its origins in the Southern Brazilian city of Porto Alegre, and its subsequent globalization as it travelled to European and North American cities. In a forthcoming post, CURA’s Adrian Bua will write a response and Ernesto and Gianpaolo will close the debate with a reply.

No one can escape the fact that we live in an era where calls for participation are ubiquitous. Participation is seen as the solution to the failings of democracy and a weakened civic spirit. Today, political actors, from specialists to politicians and administrators, compete to bear the heraldry of participation. We are talking about a new political hegemony.

This participatory era rests on new kinds of participatory processes that are different in spirit to those in the 70’s. Participation nowadays focusses on the public in general, in the form of deliberative spaces in which individuals, rather than civic associations, are invited to reflect on public affairs, and, in many cases to make policy decisions.  A direct form of participation is invoked that breaks with the tradition of relegating participation to a mere measure of public opinion.

However, viewed historically, this expansion of participation is somewhat paradoxical. Participation has ceased to be a counter-power like that of the 1970’s, and has become part of the functioning of administration and formal political power. It is a process of top-down democratization. Beginning with the revolts of the seventies against centralized bureaucracies, public administration has found in participation a faithful ally in its attempt to become more proximate to society, and realise the need for the public legitimation of politics. Participatory rhetoric has changed the hallmark with which it was usually presented – from prostesting, to proposing. Participation in the new spaces is not a matter of oppositional reclamation, but of constructive proposition.

Criticisms of this historical process have by no means been delayed. Both the content and context of this new political hegemony have been linked to the predatory spirit of neoliberalism. After all, participation’s logic is close to neoliberalism’s entrepreneurial spirit – do it yourself! This criticism is most forceful in a context in which the political impact of participation in cities is doubted. Just when there is no city in the world that does not invite citizens to participate, participation has lost its social justice focus, and provides spaces for consumerist disputes instead.

Faced with this all-engulfing neoliberal wave, the book explores the birth and journey of one of the most emblematic participatory processes; that of participatory budgeting. As a metaphor for this new political hegemony, we have seen how the travel of participation leads to its trivialization and disengagement from political processes as it lands on new shores. In this process, full of contradictions and popular struggles between lay citizens and elites such as experts, bureaucrats and politicians, the dilemma of participation’s neo-liberalization comes into view.

The problem of participation lies in thinking about the link between opinion and power only in terms of the relationship between citizens and representatives, without taking into account how political institutions work. Participation then becomes limited to a process for revealing public preferences. As good as that may be for some, it forgets all the second-order issues involved in politics: priorities must be defined in a (democratic) setting characterised by the equality of all and the existence of finite resources. It is therefore not enough to count proposals, nor to turn participation into a zero-sum game. You win, I lose. Information and debate are needed before deciding. A practical and material concept of the equality that offers everybody a real voice is needed. Therefore, it is not surprising that if we understand participation as an expression of individual preferences, in this context of finite resources, participatory processes become platforms for the selfish pursuit of individual interests.

Participation aims to build bridges between politics and society, but when it is disconnected from institutions it can degenerate into fatuous disputes. In other words, if participation is to claim a legitimate presence in contemporary society it will need to be linked to the workings of public administration. To achieve this, it is necessary to develop administrative reforms that envisage a participatory modus operandi. Otherwise participation will always be peripheral to both politics and social developments – and will thus fail to resolve democracy’s problems and the need for the public legitimation of political decisions.

Gianpolo Baiocchi is associate professor of individualized studies and sociology, as well as director of the Urban Democracy Lab and Civic Engagement at the, Gallatin School, New York University.

Ernesto Ganuza is a researcher at the Centre for Advanced Social Studies, Spanish National Research Council (IESA- CSIC) in Cordoba, Spain.