Author: abuaro01

The Justin Trudeau Brand of Photogenic Austerity

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This week’s guest contributor John Clarke argues that the Liberal Party and Justin Trudeau’s recent electoral victory in Canada is not one to be celebrated by the anti-austerity left. Rather than pursue alternative policies, we can expect the new Canadian Government to ‘stealthily’ pursue the Austerity agenda and continue a raft of reactionary policies implemented by the Conservative Harper administration.

Having replaced the crudely reactionary and rather charmless Stephen Harper as Canadian Prime Minister, the photogenic Justin Trudeau is being presented in the media as a breath of fresh air.  However, millions of working class and poor people, impacted by an intensifying austerity agenda, have grievances that will not be solved with sound bites and selfies.

Unlike the UK, where the Liberal Party went into decline in the first part of the 20th Century, its counterpart in Canada has remained a front rank political formation up to the present day.  With social democracy here playing very much less of a role, the Liberal Party has taken turns in governing with the Conservatives over generations.  It is often said of the Liberals that they ‘campaign from the left and govern from the right’.   In these times of mounting austerity, this becomes truer than ever.  Trudeau won the election by beating back an upsurge of support for the New Democratic Party (NDP).  He did this by outflanking the decidedly Blairite NDP leadership on the left. While there leader, Thomas Mulcair, vowed to be tougher than the Tories on the deficit, Trudeau adopted a Keynesian mantle and proposed limited deficit financing to stimulate the economy.

This electoral ruse was not without irony, given that it was employed by the Liberal Party.  In 1993, austerity at the federal level in Canada, took an unprecedented leap forward at the hands of the Liberal Chretien Government.  Social housing was downloaded onto the provincial governments, transfer payments to the provinces were cut massively and the Canada Assistance Plan (CAP) was eliminated.  This had provided federal money for provincial income support systems for the unemployed and disabled, while setting national standards for these programmes.  The impact of the destruction of CAP has been enormously regressive.

There is no serious possibility that the present Trudeau Government will implement serious reforms such as a national housing programme, improvements in income support systems or reverse the decline in health care standards unless they are faced with a very serious social movement that fights for such things.  In fact, the crisis that sparked post 2008 international hyper austerity, seems to be deepening in Canada to a deeply troubling degree.  The significantly resource based economy has been hard hit by the fall in oil prices. The downtown is centred in but by no means confined to the western province of Alberta, where unemployment has skyrocketed and food banks are being overwhelmed.  Moreover, as the economy slumps, Canada has a dangerous household debt level that is the highest among G7 countries.  None of this suggests any great prospects for the Liberals rediscovering their former and very dubious progressive credentials.

Since taking power, the Trudeau regime has taken care to overturn some particularly egregious measures the Harper Tories had undertaken.  Harper, for example, had tried to prevent Muslim women from taking the oath of Canadian citizenship if they wore a niqab.  When the courts struck down this hideous requirement, the Tories launched an appeal.  Trudeau was only too happy to ostentatiously kill that appeal and ‘celebrate diversity’ at no cost.  On the more decisive question of the austerity agenda’s close relative, endless war, the Liberals have been somewhat less progressive.  Harper’s shameful $15 billion arms deal with the Saudi Arabian torture state will not be cancelled and armoured vehicles, perfectly suited to murdering protesters on the streets, will be delivered as planned.  The election pledge to end Canadian airstrikes in Syria and Iraq has not only been broken but the killing and devastation has actually been intensified.  When it comes to the implementation of austerity measures, we may expect the Trudeau Government to act more stealthily that the former Tory regime but to maintain and even intensify its regressive course.

The federal system of government in Canada makes the implementation of austerity a more collaborative effort.  Some direct federal social programmes do exist, such as unemployment insurance and the Canada Pension Plan, but for the most part, social provision is in the hands of the provinces. The federal government can cut funding but not directly implement regressive policies.  If Iain Duncan Smith lived in Canada, he’d have to impose his Work Capability Assessments on the sick and disabled in one of the ten provinces.  However, the Liberal Party is at work on the austerity project in a number of Canadian jurisdictions.  In Quebec, the government of Philippe Couillard is forging ahead with unprecedented austerity measures in the face of a huge social mobilisation.  Public services and the workers that deliver them are under enormous attack.  Despite being a Liberal, Couillard has proudly acknowledged that his greatest political role model is none other than Margaret Thatcher.

In Ontario, the Liberals have been in power since 2003. They took over from a hard right wing Tory regime and have craftily consolidated and deepened the austerity measures they inherited.  They are an object lesson in the role of the Liberal Party as a kind of political chameleon.  The present leader, Kathleen Wynne, took over the job claiming she would be the ‘Social Justice Premier’.  Since 1994, social assistance payments to unemployed and disabled people in Ontario have lost at least 55% of their spending power.  This decline continued after the Liberals came to power and despite the fact that they passed a Poverty Reduction Act that they have violated by making people poorer.

The austerity agenda in Canada will be ‘kinder and gentler’ under Trudeau and his Liberal provincial counterparts only in form but not in substance.  We are really dealing with austerity in sheep’s clothing.  The contradiction in dealing with such duplicitous regimes is that they are less hard-nosed and can be forced to retreat somewhat more easily than overtly right wing governments but, at the same time, they are far more skillful in the art of political demobilisation. Dialogue and consultation are their stock in trade. It may, however, be Justin Trudeau’s misfortune to have taken on the role of Prime Minister at a time when the intensity of the austerity agenda and the social resistance it engenders will more than his charm and photogenic qualities can deflect.  Unlike David Cameron, the present Canadian Prime Minister would never stand up in the House of Commons and refer to people in a squalid refugee camp as ‘a bunch of migrants’.  His brand of austerity, however, is every bit a vicious and harmful as Cameron’s and those impacted by have just as much reason to mobilise and fight back as do people in the UK.

John Clarke is a political activist based in Canada, and founding member of the Ontario Coalition Against Poverty. He writes regularly on political and economic issues.

Learning lessons: we need to encourage more policy sharing and less innovation

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Sophie Wilson from the Institute for Government argues that there is too much focus on innovation in public services, and the we should focus more on learning from, and expanding, ‘what works’.

We all like new things. Whether it’s the latest gadget or an app to switch your heating on remotely, innovations are exciting. And this is no different in public services. Countless innovation funds and piloting programmes encourage local areas to develop and test ideas ranging from government initiatives such as the Transformation Challenge Awards through to programmes led by the voluntary sector like those available to social entrepreneurs from UnLtd. Without funding for early stage ideas you don’t get things off the ground.

So while there’s no denying the importance of trying and testing new approaches to public services; the emphasis on innovation over duplication means local areas may risk repeating the same mistakes or focusing resources on challenges that have already been solved elsewhere. This is something picked up on in the Institute for Government’s paper Joining up public services around local, citizen needs  which highlighted how a limited sharing of ‘what works’ in different circumstances can mean that the lessons from effective practices are rarely built upon (see p.12). Barbara Young, formerly chief executive of Diabetes UK, has also consistently argued the need for more plagiarism in the voluntary sector. In this way, encouraging more areas to copy instead of create could be a route to efficiency savings as well as better services for citizens.

Blunt replication of programmes or strategies from one local area into another is unlikely to be the solution to the challenges facing public services today. However, there are opportunities in increasing the diffusion of effective programmes through the sharing of innovations, ideas and practice, and the subsequent adoption or adaption of these ideas in a new local area. It is unlikely that a programme can, or should, be scaled up and rolled out across the country in exactly the same way. Local areas are different and public services should be able to cater for this diversity as recognised by the Government and its devolution agenda. But, greater sharing between local areas around how they can implement a new programme, the barriers and enablers to doing this, the resources and capabilities needed, as well as links to useful contacts could help areas to shortcut parts of their design process and help to save time and money. Context matters. Nevertheless, applying what we already know and adapting this with a new environment in mind can support local areas to build upon existing practice and avoid reinventing the wheel.

In fact, local areas are already doing this; whether getting ideas from conferences, participating in professional networks like SOLACE, or independently setting up visits to areas that appear to be doing something interesting. But, this is not yet something that systematically occurs across local government; whether because of a distinct professional culture or cultures, transport links, misaligned incentives, a lack of time or one of a myriad of other factors.

In response, the Institute for Government are starting to think about how to encourage greater sharing of practice between local areas. This has begun with a look at some of the intermediary programmes and organisations that connect local areas with each other or with interesting practice and ideas such as the LGA peer challenges, the Audit Commission or the seven What Works Centres. We want to understand what limits local areas from sharing more frequently, and increase attention on the diffusion process itself as an important, under recognised means of supporting areas as they redesign or recommission services.

As is often pointed out, devolution provides an opportunity to innovate by designing services around local, citizen needs. But increasing localisation also increases the importance of finding effective ways of sharing practice between local areas to make sure learning spreads throughout the country. This is especially important in the context of tightening budgets and increasing demands. Copying from your neighbour may have been frowned upon in the classroom, but it is an essential part of designing a smarter state.

Sophie Wilson is a researcher at the Institute for Government. If you’re interested in hearing more or contributing to the research she is involved in, take a look at the IfG’s project page or get in touch with her at sophie.wilson@instituteforgovernment.org.uk

Managing Flooding Crises: the Need for Common Sense

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In this article Ed Thompson considers ‘local resilience’ as understood from an emergency management perspective, in relation to recent and past flooding.

Almost on a yearly basis there seems to be a flooding crisis in some part of the UK, most recently the focus has been on parts of Northern England. The legislation that sets out responsibilities for preparedness and response in such emergencies goes back much further than Tory cuts to a New Labour government – operating with a very different ideology to the current Labour leadership.

The link between resilience and neoliberalism has been considered at length by acadmeics (see recent special edition and workshop coverage in Politics, and the launch of Resilience). Discussion has centred on ties between Darwinian ‘survival of the fittest’ in ecology (the source of resilience concepts, Holling, 1973), free markets and more recently in civil contingencies policy where resilience is taken to mean the ability of a system to absorb and recover from shocks. The emphasis of the Civil Contingencies Act 2004 is the delegation of public responsibilities to a local level (now without statutory regional collaboration after the demise of regions in 2010), and wherever possible to private businesses and individuals. This new era of delegated responsibility, including the general public and private sector being responsible for their own fate, is often presented under a banner of ‘responsibilization’ (Shamir, 2008) – in keeping with a neoliberal ideal of a small state which does not interfere with individual freedoms or responsibility.

There are at least two clear examples where resilience policy is contradictory. The first conflict can be seen in the implementation of ‘Emergency Preparedness’ Chapter 8 (the Cabinet Office, 2012) – the official guidance on implementing the Civil Contingencies Act. This places the duty to promote business continuity management (BCM) on local authorities, requiring the local public sector to undertake duties which encourage private (and voluntary) sector organizations to consider their own resilience.

“The Act requires local authorities to provide advice and assistance to those undertaking commercial activities and to voluntary organisations in their areas in relation to BCM in the event of emergencies (as defined in the Act). This activity is undertaken to ensure preparedness.”

These duties mean that while local businesses and voluntary sector organizations are responsible for themselves, local authorities are responsible for assisting and advising these organizations in preparing for extreme events. There is no clear measure for such activity, and little guidance as to how local authorities should go about this. CURA’s own Brahim Herbane (2011) finds great disparity in what advice is available in different parts of the country. It seems at odds with an ideal of personal and private responsibility to make the local state responsible for advising the private sector of their responsibilities.

Secondly, there are pragmatic considerations during extreme events. David Harvey (2005) presents the contradiction between the enduring hegemony of neoliberal policy while simultaneously having to preserve institutions such as the National Health Service (NHS) that hold affections from voters across the political spectrum.

As crisis events unfold we see the same pragmatism coming into effect with emergency management in the short term, bucking a trend of responsibilisation in keeping with neoliberalism which exists outside of the crisis. Under policy written while a crisis was not underway  there is no requirement for Local Authorities to issue sandbags in floods, indeed many local authorities hold very small stocks sufficient only to protect their own facilities. However, during crisis political rhetoric changes, a new situational logic of action dictates that those with the capability to obtain and distribute sandbags in effective quantities do so; and that we be empathetic to evacuated and flooded families. In 2014 political leadership very visibly changed tack on the issue of sandbags during floods:

I’ve told local councils they should not charge for sandbags in flood-hit areas – central government will pick up the cost. – David Cameron, Twitter – @David_cameron, 1:13pm, 14th Feb 2014.

During the same incident Brandon Lewis (then Under Secretary of State for the Department of Communities and Local Government) cited the Bellwin scheme as a means for LA’s to recover the cost of sandbags, and that costs should not be passed on to residents (Localgov.co.uk, 2014). The scheme allows local authorities (and some other public sector organizations) to recover 85% of an incidents cost once it exceeds 0.2% of their annual revenue budget (for Cumbria last year this was £1.27m.), though this has sometimes been flexed up to 100%.

What results from this is a policy of ‘responsibilisation’ of the private and voluntary sector organizations outside of emergencies and the abandonment of such policies during crisis events. During crises the responsibility is then passed on to Local Authorities (and other public sector organizations) to respond to the needs of those that are poorly protected – at a cost to the taxpayer. Local public sector actors are the squeezed middle, responsibility for handling crises is dumped upon them, without commensurate resources.

As Buchanan and Denyer explain, extreme events offer a period of transience in which fracture logics become apparent. The change from circumstances of stability to those of extreme events are an example of the dependence of neoliberal logics on a stable context, and crisis events (sudden contextual changes) bring the limitations of this policy logic into sharp relief. Common sense dictates the need to tax and spend for a cost effective and capable flood defence system.

Ed Thompson is a core member of CURA  and Vice Chancellor’s 2020 Lecturer at the Department for Strategic Management and Marketing at DMU

Social Exclusion and Labour Rights in the Banlieues of Paris

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The terrorist attacks in Paris have again highlighted the problem of social divisions in France and the extent to which they lead to feelings of exclusion that in some way incite violent responses. It appears that some of the terrorists grew up in or had links to the banlieues (or suburbs) of Paris, where there are high concentrations of immigrants and minority ethnic groups, as well as high levels of unemployment and poverty and a recent history of racial tensions. Many of the youth in the banlieues are unemployed, with the unemployment rate for immigrant youth above 30% according to the OECD. More generally, migrants and their children are also over-represented in low qualified jobs, with workers of North African origins experiencing the highest ethnic penalty in terms of access to employment.

France has a republican model of integration, built on the universalist values of the 1789 Revolution of secularism and equal individual rights for all. Recognition of cultural difference or ethnic communities is considered unacceptable. In contrast to the British multiculturalist model, where ‘difference’ – whether of ethnicity or religion – is tolerated or even prized, ‘difference’ in France is seen as a form of sectarianism and a threat to the republic. The French notion of laïcité, dating back to the Revolution, actively blocks religious interference in affairs of state and public manifestations of religious identity in public spaces, including workplaces. The problem for the recent generations of Muslim immigrants to France is that the proclaimed universalism of republican values – and the focus on assimilation – has meant that many Muslims feel that, if they want to be ‘French’, they must learn to be citizens of the republic first and Muslims second. This is a difficult and, for some, impossible task.

My recent research has looked at how trade unions have responded to migrant and minority workers in France. As context, it should be said that trade unions in France have one of the lowest levels of membership density among OECD countries, with only around 8% of workers being members of a union. Moreover, the union movement is divided along ideological and political lines. It also confronts ideological employers, which means that social dialogue tends to be conflictual and fairly hollow.

However, trade unions in France still have a high level of institutional embeddedness, manifest in the level of collective bargaining attained with over 90% of workers covered by some form of collective agreement. They also benefit from relatively high levels of worker turnout in workplace representative elections which are organised every 2-4 years. Elected worker representatives participate and negotiate at all levels of the organisation and enjoy a legal framework for employee representation that is the envy of trade unions in the UK, including a right to strike enshrined in the French constitution.

My previous work on French trade unions has shown that the institutional embeddedness of trade unions gives them access to resources (time, space and financing) that allows them to represent the wider interests of workers and mount campaigns to organise workers who are excluded from regulated spaces, both inside and outside the workplace. The unionisation rate among immigrant workers is only around 2%. However, this figure is based on nationality, not ethnic origin, as ethnic monitoring is not permitted in France. Migrants and their descendants are likely to be counted as ‘nationals’ as soon as they access French citizenship. This of course poses problems in terms of how we can study issues of social exclusion and discrimination, as the data needed often doesn’t exist.

What is emerging from my research in France is that trade union behaviour is still fundamentally shaped by the assimilationist model of integration. For migrants and minorities working in France this has generally meant that they have had to leave their ethnic and religious identities at the factory gates, the office door and even the picket line. One trade union activist to whom I spoke about Muslim workers taking part in a strike said that there was a ‘time for everything’ and added that he had told Muslim workers that praying on the picket line was not appropriate. There was no issue with the workers being Muslim; only the public demonstration of religious identity.

Attitudes have been changing, however, as evidenced in the debates on the wearing of headscarves. In a recent case where a woman was fired for refusing to remove the veil when asked to do so by her employer, trade unions supported the court’s decision which allowed women to wear the headscarf when working for private employers and thus not involved in providing public services. There has also been some recognition and support by trade unions for workers discriminated against on the basis of nationality and immigrant status in the past. This was the case recently when 800 Moroccan workers, working on private contracts for the public railways since the 1970s, won a case of discrimination, as they had been excluded from the benefits and status of the public-sector workers alongside whom they worked.

Even though they still approach the issue from a mainly race-blind and social rights perspective, trade unions have made attempts to integrate undocumented migrant workers who have been excluded from accessing their labour rights. Trade unions in and around Paris have done a lot of campaigning around and organising of the sans papiers workers, a large number of whom are of African origin. Ever since the 1970s trade unions have been in favour of the regularisation of undocumented workers and from the early 2000s onwards organised mass strikes of these workers to demand regularisation and respect for their labour rights. As a result, over 5,000 workers have been regularised in recent years and the campaigns continue, with greater numbers of undocumented workers organising campaigns themselves with the support of the trade unions.

This brings me back to the terrorist attacks in Paris and the subsequent discussions around social exclusion. There surely now exists a double challenge for trade unions to act as a force for integration for socially excluded members of society. Firstly, migrant and minority workers tend to work either in the margins or not at all, which means trade unions find it difficult to access and represent them. Secondly, the denial of ethnic and racial differences means that structural and institutional forms of discrimination and exclusion are ignored or not explicitly addressed, which can easily lead to a lack of engagement with the trade union movement on the part of workers who feel they have to suppress their core identities.

By contrast, the successes of the sans papiers campaign shows that trade unions can organise in sectors with high concentrations of migrants and minority workers and can demand labour rights for those working and living on the margins of society. France needs its trade unions to build on this example.

This blog is also published on Sheffield Political Economy Research Institute’s (SPERI) blog.

Dr Heather Connolly is Senior Lecturer in Leicester Business School at De Montfort University and a member of the Contemporary Research on Organisations, Work and Employment (CROWE) group and the Centre for Urban Research on Austerity (CURA).

Regional Savings Banks and the Financial Crisis in Spain

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The sovereign debt crisis that put the Spanish socialist (PSOE) government under pressure to begin an austerity programme in May 2010  started two years earlier in a crisis of the financial system.  Whilst central government initially dismissed it as a transient banking liquidity crisis derived from the global interbank lending drought, it soon proved to be a crisis of solvency.  And it was largely cooked in the country’s not-for-profit regional financial institutions, the savings banks. In a pyrrhic victory, they almost overtook commercial banks –the dominant element of national capital— in being the lynchpin of the ‘Spanish model’, a macro-economic system based on deepening existing specializations in tourism, property development and construction as ‘competitive advantages’ adapted to the global economy.

Forty-three out of forty-five savings banks, which had roughly made up half of the Spanish banking system, disappeared. The depth of their solvency problems, the policies implemented by central governments and the deterioration of the economy did away with them. After a complex programme of mergers, savings banks were transformed into commercial banks in 2012. Many were later nationalized and sold cheap to centre banks—effectively reinforcing centripetal flows of capital and resorting to strategies of accumulation by dispossession.

Many savings banks had evolved from being not-for-profit, regional and public-administration-funding into de-territorialising and financialising institutions competing for a larger share of the market. Savings banks were mutual financial institutions set up via foundational funds and managed by boards of stakeholders –founders, local authorities, savers and employees. With their duties to foster savings, develop the economy of their locality and carry out social works, they became anchor institutions in their cities/regions of origin. But since the liberalisation of the Spanish economy, and the deepening of financial market integration during the 1990s, they underwent a prolonged weakening of their regulatory boundaries –‘freeing’ their banking activities and undoing their territorial-boundedness—which encouraged many (particularly the riskier ones with less liquidity) to participate in securitization and high leverage practices (via money-markets) characteristic of financial centres.

The framework established by the Maastricht Treaty and monetary union brought about strong purchasing power that saw major Spanish commercial banks expanding internationally. And it also brought a lowering of (the very high) interest rates and a price war at home. In Catalonia this was markedly felt when the largest of its savings banks (and largest in the EU) La Caixa switched its rates to the Euribor in 2004. La Caixa had a strong pull effect on other savings banks and, in a more competitive market, they saw profit margins squeezed and found they needed to increase their investment volume (for which deposits were now not enough) just to maintain their levels of profit.

Securitization and wholesale markets provided savings banks with a massive volume of resources. The Land Act of 1998 (which made vast amounts of land available for construction) together with changes to securitization laws; lower interest rates; higher investment needs and the traditional pattern of channelling resources to sheltered sectors of the economy by Spanish banks (such as  construction) helped build an ‘urban development tsunami’. This tsunami was built with the mass influx of EU capitals invested in Spanish mortgage-backed securities and other property assets of which savings banks were keen originators.

This liquidity surge was used in lending investments that fed the bubble. Credit to finance construction reached 60% of total credit. Lending practices worsened as savings banks bought construction companies and began selling flats and mortgages via real estate agents working on commission for them. They expanded outside their own city-regions losing their clients’ trust and information advantage characteristic of their proximity banking. Moreover, lending policies rooted in savings banks’ traditional function of providing financial inclusion became predatory when, in their competition for new clients, savings banks targeted the influx of low-income urban migrant communities, as happened in Barcelona. So-called ‘dinghy’ loans –the Catalan version of US ninja loans—became Spain’s own toxic assets.

Regional financial spaces in Spain were connected to EU and global financial markets. Without this link it is difficult to understand how the housing bubble and the crisis began and unfolded.  The financial crisis soon became a general economic crisis triggering mass unemployment and shortage of credit. But, whilst the banking system was restructured and propped up by centre government and an EU/IMF bailout in 2012 (which came with strict austerity conditionality) the weight of the crisis burden was shifted onto the population.

The distribution of the initial impact of the financial debacle was uneven. Cities were badly affected but in some regions there was a marked urban-rural continuum.  Thus, the metropolitan area of Barcelona was ground zero for evictions with 59.030 cases (trailed only by Madrid with 52.276 cases). In the north-western region of Galicia the mis-selling of preference shares to unwitting savers was widespread. Regions and local authorities account for about 50% of public spending and they are responsible for delivery of most services. But real estate taxation is the architrave of their fiscal system (together with cash transfers). Without recourse to one of their traditional sources of financing, their fiscal woes  worsened following the bust and budget cuts and many had to resort eventually to the strict conditionality of the regional liquidity mechanism set up by central government to face their debt. Many also had to pick up the tab for the spending formerly financed via social works.

An archipelago of citizen interventions scattered throughout Spain demonstrated the depth of popular discontent and made up for the neglect of public authorities in dealing with the social wreckage. Citizen-led groups emerged to advocate for the interests of the masses of people in precarious housing situations as well as for those affected by the collapse of preference shares in financial institutions such as BANKIA. These groups pushed local authorities to achieve solutions. These ‘civic platforms’ also fed into broader social movements such as the indignados, and the formation of the new political party Podemos.

So far, they have already had a political impact in the victory of citizen political platforms in the 2014 municipal elections in Madrid and Barcelona, among other urban spaces. Newcomer parties Ciudadanos (centre-right) and Podemos (left) are widely expected to end Spain’s bipartisan political system in the coming general elections on the 20th of December. But it remains to be seen what they will do to transform the financial system. So far, whilst Podemos proposes an ambitious programme of democratization of the economy (including public banking, non-recourse mortgages and managed personal bankruptcy, financial transparency and taxation), Ciudadanos barely mentions finance in its economic measures.

Dr Paula Portas-Perez is visiting research fellow at the department of politics and international relations at Cardiff University. This post is based on Paula’s article ‘Plain vanilla banking? The financialization of Spanish regional savings banks’, which is forthcoming in ‘Regional Science, Regional Studies’.

Making the most of the devolution revolution

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In his budget statement last week, the Chancellor spoke again of a ‘devolution revolution’. Other areas beyond Greater Manchester will receive new powers and responsibilities previously held in Whitehall. Agreements with Sheffield, Cornwall and Yorkshire are underway, with more to follow. It can be hard to keep abreast of these developments, as each agreement contains a unique pattern of policies to be devolved, resulting in varying degrees of local control. We are supposed to see the agreements as great successes, but with little sense of what it all amounts to.

What is devolution for? New Economics Foundation (NEF) has been working with the Crick Centre at the University of Sheffield to map the arguments made for devolution, in order to address this crucial question.

We recently released the findings of this research which can be found here. A summary is shown in Figure 1 (click on the image to enlarge)

FIG1

Advocates of devolution point to economic growth as the main motivation, above all other concerns. On average, just under half of all arguments for devolution refer to its role in creating economic growth. Improving the effectiveness of public services came second with 23.7% of arguments, and strengthening democracy third at 12.9%.

From the perspective of central government departments, local governments and think-tanks alike the focus is economic growth. Creating growth in parts of the country which have struggled economically is a laudable ambition, and one that merits discussion, but it also matters how growth is discussed and what it is taken to mean.

We found that economic growth arguments are weak on explaining how growth would be achieved and focus primarily on benefits to the national purse. How income-to-cost-of-living ratios, which affect everyone’s day to day economic reality, would be affected by devolution is seldom mentioned. Reducing poverty through economic growth is mentioned only four times in a total of 1,129 arguments. Numbers of jobs created are discussed far more than the quality of jobs.

Devolving economic powers over skills, housing, business rates and enterprise could in theory improve how the local economy works for its residents and local stakeholders. Yet the current focus pays little attention to how devolution would improve the lives of local people.

A s Figure 2 shows (click on the image to enlarge) Creating a more democratic country seems an obvious aim for devolution but in fact is neglected by advocates of devolution, particularly advocates in local government.

Figure-2_devo

On average local governments refer to strengthening democracy in only 9% of the arguments they make for devolving power. They neglect the expanded role citizens could play in decision-making if decisions are made closer to home and rarely discuss the ways in which devolution could increase the accountability of elected leaders to the public. Simply creating elected mayors is not enough to revive an ailing democracy. This is why local governments should also be considering the mechanisms for citizen participation which could make devolution worthwhile.

One change could make all the difference as the devolution revolution progresses. This is to bring the debate into the open for public discussion, locally and nationally, so that everyday economic concerns feature strongly in discussion of economic growth and establish a model for more accountable, deliberative democracy. The debate has so far been conducted in the backrooms of Westminster rather than in public forums.

Several parties in government have proposed a Constitutional Convention, but are yet to act on the proposal. The convention model is a citizen forum bringing together a representative sample of people to discuss changes underway in the governance of the country. In the meantime, a group of academics and civil society groups have piloted this model in Sheffield and Southampton, showing how it would work. Drawing on examples from countries including Iceland, Canada, the Netherlands and Scotland, they show that the direct participation of local people in decision-making improves not only the democratic quality of decisions, but their effectiveness. It’s a match made in heaven for the devolution revolution.

‘The briefing Democracy: the missing link in the devolution debate’ is available for download from New Economics Foundation website here.

This post was originally published on the University of Sheffield’s Crick Centre Webpage

Sarah Lyall is a researcher and policy analyst at the New Economics Foundation. She tweets @sarahglyall and @nefSocialPolicy.

Managing Capitalism in Latin America: the Decline of the ‘Pink Tide’

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Following over a decade of relatively high growth rates wedded to redistribution, increased social spending, and the incorporation of labour and social movements into the wheels of decision making, consistent electoral success of the political Left in countries as diverse as Chile, Brazil, Ecuador, Bolivia, Argentina, and Venezuela had given the progressive ‘Pink Tide’ a growing sense of permanency. Latin America  has been heralded by many on the Left – most prominently in Manuel Riesco’s concept of the Developmental Welfare State – as a new model for development that breaks substantively with the neoliberal consensus.

But beginning with the economic and political convulsions in Brazil centred on a deepening corruption investigations linked to the ruling Workers’ Party (PT) and a widespread middle-class dissatisfaction with the government of Dilma Rousseff this is being increasingly shaken. The language and practices of austerity have begun to re-emerge in these states, with Brazil, the largest economy in the region, taking the lead in reducing social spending, unemployment protections, and taxation in a strategic re-orientation in favour of powerful business interests that began as early as Rousseff’s first government after 2012.

The unexpected electoral victory of conservative former businessman Mauricio Macri in Argentina has reinforced the growing clamour that proclaims the end of the informal progressive regional coalition. The first non-Peronist leader to gain office through democratic election since 1983, Macri has come to power with a mandate to address the “mistakes” of Kirchnerism through a new commitment to free-market economic policy. Despite assurances he will sustain some of the popular social policies previously implemented, he now represents the leading edge of the re-emergence of austerity practices.

The phrase “re-emergence” is used deliberately in these contexts as such restrictions on social spending, the rolling back of protections for labour, and the use of varied mechanisms of economic policy to promote regressive redistribution upwards to powerful firms and financial capital are all too familiar. Chile under the dictatorship of Augusto Pinochet 1973 and Argentina under the post-1976 military dictatorship and the disastrous economic stewardship of Carlos Menem in the 1990s, saw first-hand the deleterious impact of such a constellation of policy measures. IMF Structural Adjustment Programmes, most notably with Mexico in 1995, also consolidated this global counterrevolution in the region and the dramatic reversal of the “populist” redistribution and government spending strategies of the twentieth century.

The Pink Tide had ostensibly offered a peaceful interlude in these devastations, first of neoliberalism and now of emergent austerity in Latin America, as well as a return to the policies of redistribution and state support for workers. Backed by neostructuralist ideas and programmatised as strategies of neodevelopmentalism that sought to combine state-led development with an openness to international markets, progressive Latin American governments (from Lula Inácio da Silva and Dilma Rousseff in Brazil and Néstor and Cristina Fernández Kirchner in Argentina to Rafael Correa in Ecuador and Evo Morales in Bolivia) offered the possibility of growth with increasing equality, social spending to support the poor, and the genuine inclusion of the voices of workers and social movements in the politics.

Yet this distinction from the policies and practices that preceded and followed it have increasingly been shown to be deeply problematic. Alfredo Saad-Filho writing on Brazil has argued that despite the rhetoric of reform there has been little substantive change either to the political configuration of power (represented in the Constitution inherited from military rule) or in the hegemony of neoliberalism and concomitant international economic integration. On Ecuador, Jeffrey Webber goes further to argue that Rafael Correa, despite positioning himself on the radical edge of the Pink Tide alongside Bolivia and Venezuela, has deliberately demobilised the social movements that brought him to power, restoring economic power and privilege across sectors and actors that are the antithesis of his proclaimed project.

So, if not a progressive interlude contrasting the varying strategies of neoliberal and austerity capitalism, what does the Pink Tide and its neodevelopmentalist model represent? It would be too simplistic to dismiss it as a mere fraud. Evidence economic growth and redistribution in leading economies of the region does not bear this out. Declines in poverty through the famous ‘Bolsa Familia’ cash transfers to the poorest families in Brazil under Lula and the universal child support measures introduced by Cristina Kirchner (which Macri has at the moment vowed to retain) provoked a genuine redistribution of wealth towards the lower end of society. Attempts to reverse neoliberal reforms of education in Chile, the prominence of indigenous social movements in Bolivia, and environmental proposals in Ecuador also pointed to the opening up of potential new space for the redistribution of political power.

Instead, these measures must be viewed along a continuum of strategies aimed at managing capitalism. I have developed this line of argument in other areas of my research to date inasmuch as the varied progressive and regressive strategies that comprised the period of import-substitution industrialisation (ISI) during the twentieth century in Latin America represented distinct efforts to intensify exploitation and – most significantly – suppress and discipline labour to this end. The limitations and contradictions of the Pink Tide, identified elsewhere by a growing number of scholars, combined with the apparent ease at which the return to the practices and processes associated with austerity and the neoliberalism of the 1980s and 1990s, imply this progressive turn must be viewed through the same lens.

Significantly, it is by returning to the workplace, the space that at CURA’s launch event last month Phil Taylor described as the “front line” of austerity where managerial strategies seek to squeeze out maximum effort at minimum cost as the epitome of exploitation, that these contradictions can become most apparent. Alongside experience of the harsh disciplining of restrictive economic and social policies, the region has seen some of the clearest examples whereby relatively progressive developmental strategies have served to incorporate workers into intensified social organisations of production with increasing work rhythms.

The archetypical populist regimes of Getulio Vargas in Brazil and Juan Perón in Argentina serve as an important point of reference, offering an ostensible voice to organised labour whilst supporting a transformation of labour processes that deepened exploitative relations of contemporary capitalism – most obviously with the Peronist “Productivity Conferences” of 1954. More closely linked were the developmentalist strategies adopted by Arturo Frondizi in Argentina after 1958 and Juscelino Kubitschek after 1956, which sought to attract foreign capital through a liberalisation of trade and investment regulation that facilitated what I have referred to elsewhere as a “disciplinary modernisation” of industrial production.

In the same vein, the proclaimed progressive strategies of the Pink Tide have gone hand in hand with appeals to foreign investment across modern sectors, to the continued opening up of once-protected sectors to the rigours of international competitive pressures that reposition domestic firms in the global economy and impose regressive technological and organisational changes. It has even led to a return to ‘extractivism’ (most notably in Ecuador) associated with a bygone era of the nineteenth century widely critiqued by regional and international scholars. It is by analysing the changing relations in production of neodevelopmentalism and the Pink Tide, as well as the changes that have occurred before and after, that will make possible a comprehensive understanding of the management of capitalism and the interconnectedness of these periods of harsh restriction and ostensibly progressive social peace.

Dr Adam Fishwick is a CURA team member as well as Lecturer in International Relations at the Department of Politics and Public Policy, De Montfort University

Community Wealth Building in Preston

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By Matthew Brown

It is without doubt that much of Europe is in the grip of an austerity crisis.  However to build a genuine alternative to it we need to think deeper about its causes and ask questions about the fundamental undemocratic nature of our economy to be able to respond to what has also become a systemic crisis.

The 2008 global financial crash emerged from an unregulated financial sector under little form of democratic control.  The harsh austerity we see at present is a payback for the £5500 each family in our country had to contribute to bail out the banking sector.  This money is now being recouped in the form of public spending cuts, benefit and tax credit cuts, tax rises, pay freezes and increased student tuition fees which are increasingly hitting the middle class.

Added to this Richard Murphy calculates up to £120 billion per year is lost in tax avoidance and evasion often by large multinational corporations and rich individuals and Aditya Chakrabortty has produced evidence recently that an additional £93 billion per year is paid in corporate subsidy.  A mere drop in the ocean compared to the estimated £1 to £2 billion a year lost to the wider public purse through benefit fraud.

Despite this vast public wealth injected into the system there is a dearth of investment from corporations. The major banks are not properly lending to individuals and local businesses and reliance on “inward investment” over the last 30 years has produced an economy in which a fifth of what was once paid in wages has disappeared. As a result, the UK has become one of the most unequal countries in Europe.

We must look to produce a response in our communities to this systemic crisis.  To do this we should examine how wealth is produced and then capture and democratise the wealth at source.  Much can be done locally and regionally but a national government with an understanding of this system problem would fully complete the picture.

In Preston and Lancashire we are experimenting with part of the alternative.  It is inspired by regions and cities that have built a culture of economic democracy like Mondragon, Spain and emerging progressive thinking in parts of the USA.  What is significant is the economic crash of 2008 onwards had little effect in terms of unemployment and poverty in Mondragon but also in North Dakota with its sophisticated network of devolved public banking.

This new democratic local economy in the UK will have at it’s heart procurement with Councils and other placed based institutions like Universities, Colleges, Hospitals and Housing Associations spending hundreds of billions on goods and services every year but not always considering where they are buying goods and services from and what social and economic benefit that wealth can bring.

The Preston City Council led Community Wealth Building initiative has now identified over £1 billion per annum in spend on goods and services by participating “anchor institutions” in Lancashire.  The long term aim is to shift more of this wealth to local businesses and if there are gaps in provision, to fill them with new worker cooperatives.  The consultancy we are working with, the Centre for Local Economic Strategies (CLES) has begun to change procurement culture of Manchester City Council, increasing their purchasing to over 65% from the Manchester economy adding more than 5000 jobs.  What is unique in Lancashire is the public sector institutions involved are collectively adopting this ‘quasi planning’ strategy to maximise the social and economic impact of this collective pool of wealth to the local economy.

There are also vast swathes of wealth within communities in local authority pension funds.  Lancashire’s County Pension Fund has investments of over £5.5 billion which in reality is the deferred incomes of tens of thousands of local public sector workers.  The Preston, South Ribble and Lancashire City Deal has earmarked £100 million of pension money to be invested in commercial development in the local economy producing a sustainable return for fund members and creating a social dividend in the communities they live.  Elsewhere in the UK other creative uses of pension monies are emerging most notably in Islington who earmarked a massive 15% of its entire fund for social housing.  These investments have support from many unions who know access to affordable housing is a problem for many public sector workers as much as for anyone else.

At the heart of a democratic local economy has to be new social forms of ownership and support for local businesses.  In Preston, we are working with the Chamber of Commerce to encourage retiring business owners to sell their companies to their employees.  We have a number of new democratic firms including an artists cooperative of over 60 independent local artists, an educational psychologists worker cooperative, an employee owned transport consultancy with 25 employee owners and plans are underway to bring a “Unicorn” style grocery to the city.  This is complimented by Preston City Council earmarking a city centre investment of at least £5 million in its outdoor markets to support independently owned businesses to further capture wealth in the local economy.

Municipal enterprise can also play a key role and Preston City Council has a long term objective to generate energy from wind and solar power in municipal ownership to break the stranglehold of the Big 6 energy giants though this is under considerable threat from the cuts in renewable energy subsidy from Government.  However it is something we will look to do when it becomes viable.  Other Councils such as Nottingham have already ventured into the energy market recently having a positive impact on their local economy.

Credit unions and community development financial institutions (CDFI’s) are gradually expanding in Preston’s economy mirroring the growth of credit unions across the country.  The Labour administration recently fulfilled a long term commitment to establish a new city wide credit union “Guild Money” that has had over 150 members join in a very short period of time.  This is complemented by Lancashire Moneyline, a smaller credit union in Moor Nook, a number of workplace credit unions and trade unions promoting their own credit unions to members building a culture of democracy and financial inclusion.

Finally, we have insisted on quotas for affordable housing and health infrastructure as part of Preston’s Local Plan to capture community benefit from conventional development including a 30% affordable housing requirement and we have expanded the living wage by encouraging local employers to pay it through Preston City Council and its living wage partners procurement strategies.  This has seen Preston as a traditionally deprived community outperform more prosperous areas in Lancashire in terms of people receiving the living wage with a positive effect particularly on women.

With any debate about austerity and its causes we need to look to nurture creative responses and consider how we can best defend communities against it in future by making them more resilient, democratic and self-reliant.  Maybe just maybe with this new thinking emerging from Preston and elsewhere both here and abroad we are finding the answers to this system problem and uncovering the beginnings of what could become a truly democratic economy.  Time to watch this space.

Councillor Matthew Brown is Cabinet Member for Justice, Social Inclusion and Policy at Preston City Council

Investigating the Ethical Turn in Finance: Symposium Report

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On 17 September 2015, a one-day symposium was held in Leicester to discuss the “seeming ‘social’ and ‘ethical’ turn of finance in the context of the global economic crisis”. The symposium was a joint endeavour organised by academics at three universities, including PhD Student at De Montfort University, Robert Ogman, Middlesex University Lecturer in Sociology, Emma Dowling, and Senior Lecturer in Finance and Political Economy at the University of Leicester, David Harvie . Robert Ogman reports back on the day’s proceedings.

One peculiar outcome of the economic crisis and austerity policies of the last few years is the emergence of the “social investment market”. This “seeming ‘social’ and ‘ethical’ turn of finance in the context of the global economic crisis” was the topic of a recent symposium held in Leicester. The gathering was an opportunity to discuss the recent growth of financial products in “responsible” investing, and government efforts to increase private sector involvement in public provisioning, and to offset the resource gap arising from fiscal austerity measures.

Scholars from a host of academic disciplines and from a handful of European countries came to discuss together with practitioners from NGOs and trade unions, the development and implications of these new initiatives, as the programme stated, to “financialise the social”. A central aim was to discuss “the implications for the relationship between state, society, and (financial) markets, and for the users and front-line providers of services.”

Introducing the one-day workshop, the symposium’s co-convenor Emma Dowling, co-author with David Harvie of a recent paper on the nascent social investment market, framed a set of questions that participants were to discuss:

  • What new financial institutions, instruments and practices are being developed? By whom? How do they work? For example: what is the ‘social stock exchange’, what are ‘social investment financial intermediaries’, ‘social impact bonds’ or ‘development impact bonds’? What kinds of social projects are being promoted and developed? (For example, particular concerns include youth unemployment and the urban poor.). The United Kingdom, Australia and the United States along with other G8 member states are at the forefront of social investment, but is this a global phenomenon?
  • What new discourses are emerging to describe an apparent rupture with previous forms of finance, and the concern with making finance ‘work’ for society (as opposed to the other way around)? How have terms such as ‘social value’, ‘shared value’, ‘triple bottom line’ and ‘impact investing’ arisen and what do they seek to describe? To what extent is ‘social finance’ a response to criticisms of the vicissitudes of financial markets in light of the 2008 crisis?
  • More generally, to what extent is social finance a response to a perceived impasse of neoliberal capitalism? Does social finance represent a break with neoliberalism or a deepening and development of it? Will finance’s ‘ethical turn’ address capital’s legitimation crisis? Will social investment provide a source of capital accumulation and profitability? If market and financial logics are further penetrating social life, what are the implications for social relations and social discipline?
  • What is the role of the state in developing social finance and a social investment market? What are the implications for the welfare state, for public service provision and for social policy? Will public-service users – individuals and communities – really benefit? How will front-line providers – both waged and unwaged – be affected? What is the likely impact on civil-society organisations, charities and the third or voluntary sector more generally?
  • Finally, is there any alternative to social investment? How might radical social movements interpret, engage with or challenge and resist the development of social finance? What fault-lines can we detect? Does finance’s ‘social and ethical turn’ signify a point of its vulnerability, the outcome of a legitimacy crisis, and hence a space within which new opportunities may exist to advance critique from a social and ethical perspective?

The first panel opened with a presentation by Dexter Whitfield, from the University of Adelaide, and Director of the European Services Strategy Unit (http://www.european-services-strategy.org.uk/). He focused on a central initiative of “impact investment market”, namely, the increasingly popular policy experiment by the name of “Social Impact Bonds”. He explained the structure and idea of SIBs, and also pointed to a host of weaknesses.

The Social Impact Bond claims to respond to public sector funding gaps (caused by public sector budget cuts) by incentivising private investment in public provisioning. They do so by offering financial rewards to investors when a specific social policy goal is achieved, by an organisation tasked, for example, with reducing prisoner reoffending, homelessness, or the number of children in care. This functions as a public-private partnership, involving a government commissioner which identifies a social policy target, and a non-governmental organisation acting as a project manager, an investor which lends money to a civil society organisation involved in meeting the agreed-upon policy goal. If this organisation hits the set target, so the theory goes, government have reduced expenditures in criminal justice or welfare costs, and these savings will be shared between public authorities and non-governmental investors. The idea is that the government will be “leveraging private capital for public goods”. In the aftermath of the global financial crisis of 2007/08, the G8’s Impact Investment Taskforce writes, that “impact investment” will “harness the power of entrepreneurship, innovation and capital for public good”. It is “the invisible heart to guide its invisible hand”.

This theory is being promoted on the national and international levels. As Whitfield writes in his paper, “Alternative to private finance of the welfare state: A Global Analysis of Social Impact Bond, Pay-for-Success and Development Impact Bond Projects”, “there are currently 54 operational social impact bond projects in 13 countries with at least a further 23 at the planning or procurement stage. The UK is the global leader with 32 operational projects with outcome payments valued at £91m, followed by the US with 9 projects.”

Whitfield provided a list of “30 financial and public policy flaws” in SIBs, arguing that, contrary to the purportedly innovative qualities of SIBs, that they are deeply path-dependent, calling them a “mutation of privatisation”. He criticised the increasing role of market ideas and private sector actors in the design, implementation, and evaluation of social and welfare policy, and the further commodification of state welfare functions. SIBs “extend markets and market forces further into the welfare state that could ultimately threaten social rights.”

Going beyond a critique of SIBs, Whitfield also sketched an “alternative vision of public services”, taking up some of the central themes of the SIB policy experiment, such as “early intervention and prevention” and “new public service management”, but placing them in a strongly public framework that limits market forces. This, he argued, would involve the “democratisation of public services”, “social justice and reducing inequalities”, “public ownership and investment”, “progressive taxation”, and “good quality jobs”, which he discusses in his paper.

Turning the focus to an earlier wave of “ethical finance” initiatives, Mareike Beck of the University of Sussex, provided a look at microfinance. Her presentation focused on the supply-side of these trends, looking at the case of German banks in “expanding the provision of ‘poor appropriate’ financial products into the Global South”. She provided a look at the Deutsche Bank in particular. She argued that microfinance cannot be understood simply as a response to the failures of Structural Adjustment Programmes in the 1990s, but also reflect the efforts of these institutional actors to become international investment banks, and of German finance to address legitimacy problems at home.

Claire Parfitt of the University of Sydney contrasted the new wave of “responsible investment” initiatives of the World Economic Forum and the United Nations with earlier, often faith-based, divestment or “ethical investment” campaigns that pressured firms to halt business practices considered to be unacceptable or unethical. She also discussed the role of pension funds within responsible investment portfolios, and the tensions this creates within trade unions by the “worker-investors” who take on “dual subjectivities.”

Norbert Wohlfahrt and Monika Burmester, from the University of Applied Sciences in Bochum, Germany, focused on changes in welfare from provision to “impact”, and from aftercare to preventative care, and the shift from public to private hands, organised around a business model. Their presentation showed how this strategy is connected to the E.U. “human capital” strategy, which, “equates optimal prevention strategies with the active valorisation of labour power as a commodity”. The result is that “the political ideas of supply-side economic and social policy are imposed on social work”.

Allison Roche, of the public services trade union, UNISON, provided a labour perspective of the “social finance” turn. Her comments focused on the growth of social enterprises known as “public mutuals”, which are increasingly taking over the delivery of public services and dismantling the public sector and welfare institutions. She challenged this blending of public and private values in these developments, as well as the informalisation of labour standards as employees shift from the public to private sector.

Robert Ogman’s talk focused on the resonance of “social finance” initiatives, pointing to their success in framing a purported “social neoliberal compromise” in response to austerity’s legitimacy crisis. He argued that SIBs implicitly legitimate the argument of austerity critics by acknowledging social crises. Yet, while they see the funding gap for social provisioning as having to do with a resource imbalance between public and private hands, they reject a redistributive approach, instead pursuing a plan of private investment, which has had mixed results and contains significant risks. SIBs too respond to critics’ objection to neoliberalism that warn of its socially destructive capacity (most recently seen in the financial meltdown of 2007/08). Yet they reject re-regulation, instead calling for the incentivisation of “ethical” investment. Thirdly, SIBs acknowledge the persistent fiscal crises of the state, yet, rather than increasing revenue through progressive taxation, they suggest that governments can replace social expenditures with private capital investment in social provisioning. Hence, SIBs acknowledge a set of arguments advanced by austerity opponents, yet channel these into the expansion of market-centred “public responsibility” initiatives. This is a contradictory process which austerity opponents could intervene in and point out the limits and dangers to, and by doing so, also advance a real paradigm shift.

Additional presentations included: Davide Caselli’s (University of Turin, Italy) paper on the “Financialisation and the Restructuring of the Italian Welfare State”, Marco Andreu from the University of Warwick on “Impact Investing and the Contingency of Market Ethics”, Julian Müller  from the Centre for Research on Multinational Corporations on “Harnessing Private Finance for Public Policy Goals”, and Jane Lethbridge (University of Greenwich) on “The Role of the State in Developing Social Finance and a Social Investment Market”. External discussants, Chris Clarke (University of Kent), Donatella Alessandrini, (University of Warwick), Adrienne Roberts  (University of Manchester), and Ekaterina Svetlova (University of Leicester) moderated and provided important outside perspectives to the discussions.

The meeting provided a rare opportunity to present critical perspectives on the emerging paradigm, which is mostly dominated by the think tanks and advocacy groups of the social finance policy network spanning the state, market, and non-governmental organisations.

The session closed with discussions about future research collaborations and public outputs. To contact the organisers, please contact Robert Ogman (robert.ogman@email.dmu.ac.uk).

Robert Ogman is a PhD candidate at the Department of Politics and Public Policy at De Montfort University, as well as a core member our team at CURA

Devolution deals: three risks

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Devolution to city regions is a central pillar of the conservative government’s industrial strategy. The ‘Northern Powerhouse’ model developed in the Greater Manchester Combined Authority (GMCA) is being rolled out through ‘Devolution Deals’ and the Cities and Local Government Devolution Bill. Advocates of devolution argue that it can close regional disparities in economic output by boosting growth in city regions. It is also argued that closer proximity of devolved administrations allows policy to be tailored to local needs; that devolution contributes to increased dynamism by creating opportunities for local innovation and increases local participation and accountability. As recently summarised by the Local Government Association these are points of consensus in British policy circles.

However, the evidence of devolution as a driver of economic growth, convergence in social and regional inequalities and is pretty thin.  For example, one analysis of devolution concluded that the evidence in favour of such links is very weak and another found a moderately negative relationship. It seems that this evidence is overlooked by the general consensus in favour of devolution amongst policy makers.  In this blog, I will set out three key ‘risks’ that explain failure to deliver on the ‘economic dividend’ argued for by so many proponents of devolution.

The balance between the transfer of resource and responsibility

It is often argued that the ‘litmus test’ of devolution is the balance between the transfer of policy responsibility and resource capacity. On this test, it can be said devolution in the UK has been non-existent in recent history – the purse strings have remained under tight Whitehall control. Research on the coalition government’s devolution reforms found that the scale of devolved functions heavily outweigh the devolution of resources to carry these out effectively. In order for local units to exercise devolved responsibilities effectively, resources and resource raising powers need to be commensurate with responsibilities. The Conservative government’s devolution deals are being pursued in a context of even harsher projected public spending cuts. It is therefore difficult to avoid the cynical conclusion that devolution forms part of a broader agenda to transfer the responsibilities of managing cuts to lower government tiers, rather than a genuine attempt to construct a more decentralised political economy.

Exacerbating inequality

‘Devolution deals’ seem to involve a more fundamental shift of power away from central government than previous attempts at devolution. However, these deals are struck on a case by case basis. Some resource raising powers are on the table, but some regions receive more powers that others – leading to an asymmetric distribution of powers that could exacerbate existing inequalities. Even if these were uniformly devolved, the ability to capitalise upon these is likely to differ across city-regions.  It is also noteworthy that many of the policies that previously distributed the proceeds of the UK’s London and finance-centric economic model are being discontinued by the austerity agenda. Recent research by the Institute for Fiscal Studies makes it clear that measures such as the ‘Living Wage’, which is presented as mitigating these impacts, will do little to compensate for those at the cutting edge of these reforms. Compounded by the imbalance between the devolution of functions and resources noted above, heed should be taken of the possibility devolution to city regions serves as a model for the shrinking the welfare state.

Collaboration and co-ordination between regions and governance tiers

Devolution deals are concerned with arrangements for individual cities and city-regions. Beyond the aspiration for a larger collective contribution to national economic output, there is little focus on the relationships between regions and the impact on devolution deals upon the overall functioning of the economy. Because of this, analysts of devolution have raised the possibility that rather than leading to an “effective and coherent yet more locally autonomous system of government”, devolution policy in the UK might deliver “a disconnected set of governance fiefdoms pursuing more or less strategic ends with varying degrees of competence”.  A related likelihood is the devolution deal model will encourage competition over collaboration between city-regions. As economist James Meadway argues “by granting large cities more powers on the allocation of spending, but leaving the level of taxation, spending and borrowing under tight Treasury control, regions will be forced into competitions with each other to attract business expenditure and therefore extra tax revenues”. This could lead to a regulatory ‘race to the bottom’ that would substantially undermine the collective potential of city-regions to deliver improved economic and social outcomes.

In conclusion, a viable model for a more decentralised political economy should:

  • transfer ‘effective’ policy autonomy by providing adequate resourcing opportunities for devolved units;
  • reduce inequality within and between regions and social groups;
  • provide effective co-ordination between regions and governance tiers.

Although devolution deals are an emergent approach whose outcomes are not yet evident, the ad-hoc and case by case nature of the devolution deals, and the context of harsh public spending cuts within which they are taking place, are likely to lead to negative outcomes regarding the three areas above. It is therefore quite doubtful that devolution deals can constitute a viably generalisable model to deliver a more decentralised and effective political economy.

Adrian Bua is Research Assistant at the Centre for Urban Research on Austerity, as well as at the New Economics Foundation