Policy & Politics

This page contains posts on politics and policy relating to Urbanism, Austerity and other issues that are of interest to CURA, in the UK and internationally.

Austerity Diasporas – Households in Crisis: Austerity, Migration and Family in Portuguese London

abuaro01

In today’s post Lisa Rodan introduces a series of publications on her ongoing PhD research into how Portuguese migrants understand their lives and experiences in relation to the political and social changes wrought by the 2008 financial crisis and the austerity measures that followed. For the past 12 months Lisa has been carrying out ethnographic interviews with university educated, Portuguese people in their 20s, 30s and early 40s in London, supplemented by time spent in Portugal where she has been lucky to meet some of their families. In a series of posts Lisa will share her initial analysis of some key themes arising from her fieldwork data, which she began to collect in June 2016 just after the Brexit vote. These encounters have ranged from one-off interviews to valued friendships and time spent with each other’s families. The content of the series will be a very close reading of  fieldwork notes in their raw form. Lisa welcomes any input and suggestions from interested parties.

Today’s blog, the first in a four-part series, will focus on social changes in Portugal leading up to the 2011 austerity measures. I will continue next month by reviewing how migration has shaped Portuguese history and what makes this latest wave different. Part three will look at London and how Portuguese migrants exist within it as a changing, global city in a time of European-wide austerity. Finally, I will discuss predictions for life after Brexit and how my research participants view recent positive changes in Portugal in terms of their own futures.

The following blog post is the first in the series on austerity and family – on the theme of “the changing role of the family / state in Portugal”.

“Things were going well, there was so much to do in Portugal, people were positive about their lives, their futures and then the crisis happened.” Carlos, 45

Carlos, 45, Lisbon, teacher turned IT consultant. Cecilia, 26, Vila Real, nurse. Sofia, 35, Porto, scientist[1]. Different worlds and stories but there is one thing they can all agree on- that they are a product of a ‘golden age’ of social and economic expansion in Portugal throughout the 1980s and 90s that no longer exists. These are the children of Europe, making their way in a very different world from the one their parents aspired to on their behalf. This was a world defined by prosperity, with education- via a proliferation of new universities all over the country- at its centre. The graduates of this expanded educational system form the backbone of a new middle class who found themselves with no place in the Portugal during the first decade of the 21st century.

Changing expectations is the key concept here. Values had transformed from the days of the Salazar dictatorship (1926-1974), and in the years following Portugal’s 1986 admission to the EU. Education was the key to an exciting new world where, for the first time, a ‘good life’ was accessible within Portugal, as long as one worked and studied hard for it. A long tradition of migration in search of a better standard of living, albeit through low paying jobs, was being turned on its head in favour of a prosperous future at home.

This new middle class, many of them the children of migrants who had returned to Portugal during the ‘golden years’, saw their expectations for a life different to that of their parents diminish before their eyes when austerity measures crippled the Portuguese economy in 2011. The industries worst hit were represented by thousands of unemployed graduates in nursing, teaching and construction- graduates who would now join the traditionally less educated migrant groups in seeking their fortune elsewhere.

The older ones I’ve spoken to are still angry. They remember what life was like before, although their anger has significantly diminished in the six years since the hardest repercussions of austerity were felt. However, it is the under 40s who have crossed my path more, and they define their experience as fleeing the prospect rather than experience of unemployment or stagnant careers. Expectations have once again changed in the ten years following the financial crash and again and again I am confronted by stoicism, a confidence in their ability as Europeans to find a way around the challenges of Brexit, but most of all a hope for the future rooted in trust in the same educational capital that prompted them to seek a world away from family and friends back home.

These graduates in their 20s and 30s encompass the values of a generation raised with Erasmus exchanges, travel opportunities and an affinity for the English language that, they explain, contrasts them to their parents, whose clinging to job security above all else is alien to what they have been brought up to believe. Nevertheless, the two sets of values are inexorably linked, not just through the obvious affective family bonds but through ongoing support networks. These networks are both financial, allowing young people to undertake internships, language classes or simply the space to save and figure out what to do next, and emotional, communication technology offering an opportunity for transnational connectivity in a way hitherto unexperienced by previous generations of migrants.

But what are the main differences between the EU generation in London and their parents, the children of the dictatorship? The former overwhelmingly present their experience as providing hope, meaning and pride through success (or the potential to succeed) in a career which is both internationally transferable and offers recognition of the individual’s talents. The irony at work here is the root of such hopes in the earlier prosperity wrought by neoliberal expansion which could only temporarily mask the inability of the economic and political framework of periphery countries to support the excesses of global finance and failures of the monetary union. What we are seeing now are the social repercussions of expectations of access to global consumerist comforts and existential fulfilment without the need to migrate. For many, this is now only attainable through planning a future outside Portugal.

Those Portuguese who recall pre-EU days defined by lack of both consumerism and the welfare state claim the younger generation don’t know the truth of how hard life can be and undervalue security. Those who have migrated and remained abroad describe their home country lovingly but as being devoid of opportunities befitting their qualifications and experience- a country mired in a system based on nepotism that undermined ‘EU values’ of efficiency, prosperity and merit. The young people I have spoken to refer to a favours system based on pre-revolution mentalities where contacts, rather than ability, are the key to getting ahead and have led to a country stuck in the past, where aspirational and intelligent young people migrate, leaving the same old names in charge.

Lisa Rodan is a third year PhD student in Social Anthropology at the University of Kent where she is working with three colleagues on an ESRC funded project entitled Household Survival in Crisis: Austerity and Relatedness in Greece and Portugal.

[1] All names have been changed

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.

From Surge to Sensation: Corbynism and the Unexpected Renaissance of the British Left

jdavie06

CURA director Professor JonathJeremy_Corbyn_speaking_at_the_Labour_Party_General_Election_Launch_2017an Davies reflects on the implications of June’s general election result for the socialist left in the UK.

When Jeremy Corbyn was first elected in 2015, I argued that he would only be able to resist the establishment backlash, especially from his own perfidious MPs, if he could make the surge that propelled him to the Labour leadership infectious. When Theresa May called the General Election on 18th April 2017, there was precious little sign of this happening. Labour was polling in the 20s; the Tories seemed on course for a landslide and the left set for a historic defeat. The renaissance between then and the election of 8th June is staggering and of historic proportions. Corbyn’s election campaign, a simple left wing manifesto, mass rallies, positive media exposure and an appeal rooted in his quiet sense of personal authenticity, has transformed the prospects for the left in Britain.  The Corbyn surge has indeed become infectious.  In the process, it has shattered several myths.

It first shatters the myth of “unelectability” peddled by critics from the now-contrite Owen Jones rightwards. If a Corbyn led Labour Party can achieve more than 40%, only a month after polling 28%, there does not seem to be any inherent barrier to it winning 45% or 50% of the vote. Corbyn’s success is performative: as a Guardian columnist put it, “the more plausible he looks, the more support he will gather“.  This insight was borne out by an initial post-election Survation poll, showing Labour now in a 6% lead. Moreover, even before the surge got going Corbyn was more popular, not only than the toxic figure of Tony Blair, but also Ed Miliband, former leadership rival Yvette Cooper and Mayor of London Sadiq Khan. The takeaway lesson from the election is simple: a left wing candidate can win on a left wing manifesto.

Second, and relatedly, the Corbyn campaign shatters the self-serving establishment delusion that we have entered an age of “post-truth” politics, where emotion and belief hold sway over reason and fact. Academia is notorious for making epochs out of fads, and “post-truth” politics is a case in point. Corbyn and Bernie Sanders in the USA both tap into a fervent sense of possibility. There is a craving for authenticity, the hope that sincerely held beliefs can be rendered factual and truthful on the ground: that ordinary people can once again exercise influence, if not mastery, in the political world.

It thirdly shatters another self-serving establishment myth: that young people won’t vote. It rather confirms that abstention was not due to “apathy”, but reasonable and reasoned “antipathy”, or alienation. For decades, the mainstream political parties had nothing to offer people demoralised or repelled by neoliberal groupthink.  For a long time, there has been good in-depth research refuting the theory of “apathy”, ignored by psephologists and pundits (e.g. Marsh, O’Toole and Jones, 2007). The reprehensible Tory claim that Corbyn bribed younger people to vote for ‘free stuff’ is further refuted by evidence showing tuition fees were by no means top of their list of concerns.  Nonetheless, Corbynism resurrects the idea that  “free stuff” funded from progressive taxation is precisely the mark of a decent society and that burdening young people with £80 billion in tuition fee debt was a national disgrace.

Fourth, it shatters the conveniently anti-working class myth that Brexit and UKIP voters are one-dimensional racists. At the start of the election, it seemed that UKIP had done its job and the Tories were set to clean up in former Labour heartlands. To be sure, a large number of working class UKIP votes did go to the Tories, but many were convinced to vote Labour.  Surely, then, more still can be won back. It is worth recalling that until Cameron called his referendum, EU membership was a non-issue. A year later it seems to be a non-issue once again. To the consternation of both Leavers and Remainers, Brexit did not dominate the election. In good part thanks to the Corbyn campaign, nor did immigration. Ideological and everyday racism remains a huge issue in British politics and society. The Leave vote unleashed an appalling wave of hate crimes, as did the recent terror attacks in Manchester and London.  Yet, Labour’s campaign on an optimistic anti-austerity, pro-public services platform has begun to change the narrative on both immigration and security. Given an alternative upbeat political focus, fear of foreigners began to slip down the list of voter concerns.

A fifth myth, now shattered, is that a supine and impotent left could do nothing about Brexit but seek to retain membership of the “single market” described by New Labour spin doctor, Alastair Campbell, as “Mrs Thatcher’s greatest achievement”. To cling to the single market under current rules is effectively to say that corporate interests must always dictate how the British economy is run.  Arch-Brexit Conservative MEP Daniel Hannan pointed out that “several trade union and Labour figures, including some Remainers, now see Brexit as an opportunity to withdraw from EU rules that hamper the nationalisation of industries, and encourage contracting out of public services to private firms”. During the EU referendum campaign, this so-called #Lexit position – for a left wing Brexit – was dismissed as fantasy politics, even by committed socialists. Today, it does not appear quite so fanciful. Labour will undoubtedly have to take a clearer position if it enters government and set out the economic and political parameters of what a progressive Brexit, including the idea of a “reformed” single market, might look like. The defence and extension of free movement remains an inviolable principle for the internationalist left, an issue Labour has fudged. But whatever this position might be, the left is now in a position to influence the debate.

What of the broader significance of the Corbyn surge? I have long been wary of using the word “crisis” to describe the drearily routine politics of the UK under austerity. While there has been enormous suffering for which the term “social crisis” is apt, in politics “crisis” is meant to convey a sense of upheaval conspicuously missing for much of David Cameron’s “age of austerity” (see Bayırbağ, Davies and Münch, 2017). However, in winning over nearly 13 million people, Corbyn may have provoked an incipient full-blown crisis of the British state, something that appeared until recently to have been averted in the aftermath of Brexit. This is partly a crisis of political legitimacy.  The prospect of a weak and divided Tory government propped up by the Democratic Unionist Party, a pre-historically bigoted organisation whose culture and politics are alien to the vast majority of Britons, looks like a recipe for instability and strife.  It is also partly, at last, a political crisis of neoliberalism. This is the authoritarian “free market” doctrine that Britain’s politicians managed to resuscitate after the 2008/9 economic crisis. Presented with an intelligible non-UKIP alternative to the debilitating free market austerity consensus, people were very quickly persuaded and voted for it. Most importantly this is, and has the potential to further become, a crisis of hegemony in which the left in all its forms can fight with renewed confidence for socialist alternatives.  A new wave of anti-austerity struggles is one possibility, linked to the refusal of Tory hard Brexit logics – notably Mrs May’s threat to turn Britain into an offshore tax haven.

From the standpoint of austerity, the revival of the British left through the improbable vehicle of Corbyn’s Labour Party is thus a cause for optimism.  But it certainly is not cause for complacency. Whether the notoriously fractious British left can seize the moment remains to be seen. Little has yet been won and the British ruling class in both its economic and political guises is a formidably ruthless force. The neoliberal Blairite wing is already on manoeuvres. In the Mail on Sunday, Peter Mandelson called for “moderate” Labour MPs to stand by Theresa May, provided she takes a more flexible approach. He enjoined that “mainstream Labour MPs, who worry about the impact of the continuing Corbyn revolution on centrist voters, should be prepared to stand by the wounded PM, and likewise she should welcome their approach in the national interest”. If nothing else, this shocking intervention lays bare the extraordinary lengths to which the Blairite right will go to sabotage the left. On the electoral front, voting preferences are extremely fluid. Since the 2015 election, a working class Labour voter might have migrated from Ed Miliband to UKIP via Brexit and then to the Tories, only to be won back at the last minute by Jeremy Corbyn. This fluidity shows that Labour can no longer rely on traditional working class affiliations: it can only win through building and sustaining political credibility. Nor should we overestimate the influence of socialist ideas. Moreover the battles Corbyn faced as Labour leader seem trivial compared with what he would endure as a socialist prime minster, presiding over an ailing 21st Century British capitalism – potentially severed from its European markets.

But with these necessary warnings this is, at last, a time for optimism among anti-austerity forces and the left. The new politics fits very well with our core research priority in CURA, to explore the parameters and potentialities of the emancipatory city. As his enormous election rallies attest the Corbyn surge is, if nothing else, an urban movement anchored in Britain’s cities. If it is to progress further, with the age of austerity finally brought to a close, urban politics will be crucial.

Jonathan Davies is Professor of Critical Policy Studies and Director of the Centre for Urban Research on Austerity at De Montfort University.

Communities first? Hybridity helps understand governing neighbourhoods under austerity

abuaro01

OLYMPUS DIGITAL CAMERA

Madeleine Pill and Valeria Guarneros-Mesa report on their research into hybridity and city governance in Cardiff, which was recently published in Policy and Politics.

Welsh Government is phasing out its (former flagship) Communities First tackling poverty programme from 2017/18.  The Bevan Foundation, a think tank, has stressed that subsequent local action should be led by ‘community anchors’ – community-based organisations with a good track-record and strong community engagement.  Our research using the conceptual framework of hybridity – conducted as part of the Transgob project in Cardiff, Wales – supports this recommendation, and highlights the need for local government to relinquish its former levels of control to give these organisations space to develop approaches which work for their communities.

The research explored what austerity means for participation in city governance.  The optimistic view is that making governance more participatory can help overcome the hurdles of bureaucracy, with government ceding control to enable capacity to address complex problems.  The pessimistic view is that city governance remains dominated by state elites, with third sector and community partners co-opted to compensate for the decline in state provision, compromising their ability to advocate for and ensure that communities get decent services.  In Cardiff we uncovered attitudes and practices somewhere in between these two views.

We found that austerity had accelerated the city council’s use of its city governance structure, the Cardiff Partnership, to share the risk and responsibility of service delivery with other public organisations, but also with third sector organisations and neighbourhood-level community groups.  Communities were certainly having to take more responsibility for delivering their own (formerly public) services, such as play and youth services and the maintenance of parks, sports grounds and streets.  Those at the neighbourhood frontline faced tensions and power conflicts in trying to develop workable practice.  But we did find that community-based organisations had some room for manoeuvre in developing forms of co-production that were rooted in communities as well as responding to the strictures of funding cuts.  One example was time-banking, championed by a deprived community-based organisation in south Cardiff.  The approach means that volunteers can exchange equivalent hours of providing a service such as kids’ school holiday activities for other services.  The scheme was underpinned by the council offering access to facilities such as swimming pools, but the opportunities to spend credits earned within the community were expanding, indicating potential for it to become self-sustaining (and thus definitively community-led).  But it was too early in our research to tell whether attempts to replicate it will be successful.

The city council was also seeking to transfer assets such as libraries and community centres to communities.  The frustrations of this process – such as the need for willing community groups to become formalised organisations – showed the need for change in the council’s attitudes to risk.  In the words of a Welsh Government officer, government needs to ‘recognise that the cheapest and best way to achieve real things is to spot what people are doing for themselves and support them’.

When the Communities First programme was reshaped in 2011, Cardiff Council innovated by contracting community-based organisations to manage the four deprived neighbourhood ‘clusters’ eligible for programme support. In so doing, the council downloaded risk and offloaded staff costs as the organisations took on responsibility for finance, HR and evaluation – thus becoming hybrid third-public sector organisations.  Their staff had to navigate the tensions and dilemmas of implementing a (national) programme, engaging in the (city-wide) strategy overseen by the Cardiff Partnership, and the needs and demands of their communities.  Doing this aligned with the demands of austerity, enrolling these community organisations into service delivery in ways that included voluntarism, thus increasing community self-reliance.  But we also found, to an extent, that community organisation staff were able to innovate (such as with timebanking) – and in ways that maintained their community-focused mission.

Therefore our Cardiff research shows how the ‘devolution, decentralisation and downloading’ of Peck’s (2012) ‘austerity urbanism’ encourages hybridity at a scalar, organisational and individual level.  But our research also reinforces the need to understand local practices to provide insight beyond the dualism of empowerment or incorporation.  The Cardiff experience of participatory governance demonstrates the potential for transformative alternatives in the everyday and the small-scale – and also highlights the need for state supports rather than constraints in these processes.   In the case of Wales, the need to sustain the work of community anchors should be a priority.

The ‘Transgob’ project analysed the discourse and practice of participatory urban governance under austerity in two British (Cardiff and Leicester) and four Spanish cities.  It was funded by the Spanish government’s National Research and Development Plan (reference CSO2012-32817).

Madeleine Pill is Lecturer in Public Policy at the University of Sydney, and Valeria Guarneros-Mesa is Senior Lecturer in Public Policy at De Montfort University, as well as a core member of the Centre for Urban Research on Austerity

 

Austerity in time and space: the case of Germany

abuaro01

germany-96590_960_720In today’s post Felix Wiegand, Tino Petzold and Prof. Bernd Belina argue that while austerity policies have often been implemented as part of a short-term, often authoritarian political offensive (a “shock strategy” as Naomi Kline put it) in (West) Germany this was carried out “piecemeal” over a thirty- to forty-year-time frame, which also included the subsequent adaptive and normalising effects. The authors discuss several important historic markers and dynamics to illustrate this process while emphasising the multi-scalar and spatially unequal nature of implementing austerity.

The history of austerity in (West) Germany, following the Allied victory over Nazi Germany, began during the first half of the 1970s as the Fordist development model started to come apart not just politically, socially and culturally, but in particular economically. Two decades of relative stability of German society and the “brief dream of never-ending prosperity” were followed by a cycle of economic crises that had reached its temporary high point in 1974/75. During the first years, the (West) German state reacted to the effects of the crisis with counter-cyclical fiscal and economic policies based on Keynesian ideas. However, a turn to austerity policies was soon after carried out – at a time when power relations in German society shifted and a “national state characterized by market competition” was created.

This was started by the social democratic-liberal government coalition led by Helmut Schmidt, German Chancellor from 1974 to 1982. During his first government policy statement on May 17, 1974, Schmidt announced a change to how government debt will be managed. He said that “[t]he Federal Government will use all constitutional and political measures at its disposal to their fullest extent in order to commit federal, state and local authorities to cost-cutting budgetary policies starting in 1975.” The following year’s Budgetary Structure Law substantively implemented this announcement by putting the Federal government on a restrictive fiscal path.

The budget situation of states and municipalities worsened during the subsequent years of deindustrialisation processes as a consequence of the crisis and because of tax law changes such as the elimination of the payroll tax in 1979. As the local state experienced a fiscal crisis, local political projects were established that combined cost-cutting measures with early types of entrepreneurial urban policies – events that put in motion the long-term transformation of urban politics.

Also on the federal level, the focus shifted to austerity and neo-liberal supply-side politics towards the end of the social democratic-liberal coalition government (“Budget Operation 82”) and in particular during the conservative-liberal governments under the leadership of Chancellor Helmut Kohl (1982-1998). In his first government policy statement, Kohl put fiscal policy at the center of the attack on the Keynesian welfare state consensus by announcing his vision of a “well-managed country through well-managed budgets.” During the 1980s, the German government consolidated the federal budget and lowered public spending – similarly to developments in the UK under Thatcher’s leadership, albeit without the same intensity of conflict with organised labor.

The unification of the two German states in 1990 opened a window of opportunity for continuing the policies of the 1980s.  On the one hand, the policies of the German transitional privatisation agency supported an enormous privatisation project for making formerly publicly owned East German companies competitive for the global market. On the other hand, expectations for a speedy global market integration of these now privatised companies led to the (neoliberal) decision to forego tax hikes for financing German unification. Instead, the government opted for not interfering in the market in hopes of covering the cost of unification by an economic upswing.

After it became obvious early on that these hopes would not materialise, the German government responded with a classic “failing forward”, in Peck’s terms, of neoliberal policies. The growing public debt increased the pressure on the government for limiting new borrowing. As a result, municipal “budget consolidation plans” became popular during this time. The Maastricht Treaty (1992) and the Stability and Growth Pact (1997) implemented similar policies on the European Union scale. The federal Savings, Consolidation and Growth Program (1993) aimed at cutbacks of around 35 billion Deutsche mark by slashing unemployment and social welfare payments by 1996. This policy was, however, only the beginning of a comprehensive reduction of welfare state services under the banner of budget consolidation characterized by a roll-back of the welfare state, cuts of public sector jobs and reduction of public investments.

There are similar connections between attempts at shrinking the welfare state and the policies of Chancellors Gerhard Schröder (1998-2005) and Angela Merkel (since 2005). Massive tax cuts during the social democratic-green coalition governments under Schröder’s leadership, adopted with the intention of improving the competitiveness of German companies, exacerbated the structural underfunding of the state. Under Merkel’s leadership, public debt continued to increase during the peak of the 2008-2009 financial and economic crisis, as bailout packages for failing and troubled financial institutions worth billions of euros and further tax cuts were adopted. At the same time, Germany introduced several constitutional regulations and mechanisms such as the balanced-budget amendment (2009), the European Fiscal Compact (2012) and municipal “budget consolidation programs.” The constitutional changes institutionalised the neoliberal ideal of a balanced budget on various scales and further limited the financial scope of public expenditures. In recent years, this politics of constitutional austerity has been reflected, for example, in the German government’s 2010 austerity package, in public service staff reductions and inadequate compensation levels for state and municipal employees and – despite some concessions regarding social spending – in a new round of municipal cost-cutting measures.

The diverse nature of the individual measures enacted on the various scales of the state shows the significance of the spatial dimension in the process of implementing austerity in the Federal Republic of Germany. On the one hand, financial burdens that mainly arise from the delivery of welfare and public services, which have been funded through Germany’s federal system, have increasingly been shifted to lower levels of government – a classic scalar dumping. German states such as Bremen and the Saarland as well as many municipalities in the former industrial heartland have experienced the full brunt of de-industrialisation processes – in addition to the limited opportunities of income generation and the negative repercussions of tax cuts on government revenues. This has left many levels of government exposed to a form of structural underfunding and has established austerity as the norm even in the absence of cyclical crises. It becomes apparent that the spatial hierarchy within Germany’s government system has been used on a regular basis for imposing specific budgetary consolidation requirements and austerity policies onto subordinate levels of government – often against their will and beyond their capabilities. This practice has taken on a new quality with the institutionalised balanced-budget regulations that have been introduced at all levels of government since the 1990s and in particular after the 2008-2009 financial crisis. The scalar linking and reinforcing of the individual mechanisms and policies across various government levels has created a tightly laced corset of austerity in Germany.

In a sense, all levels of government are impacted by austerity. A geographic perspective, however, shows that austerity’s tangible effects and the remaining room for action are unequally distributed across Germany. The local scale suffers the most from austerity. Within the federal government structure, municipalities are the lowest level of the spatial hierarchy and possess, despite their constitutional right to home rule, particularly little room for action. Especially (larger) cities are the focal points where public service agencies and poorer as well as marginalised populations are spatially concentrated. Cost-cutting measures are directly experienced by urban residents on a day-to-day basis and, more often than not, lead to an extensive crisis of social reproduction. As a result, austerity is hurting municipalities and, in particular, cities the most – although the extent differs from city to city and from municipality to municipality. The politics of austerity has affected first and foremost economically disadvantaged municipalities during the last decades and has even further reduced the already few resources that are locally available for addressing economic and social needs. On the other hand, prosperous cities and municipalities have been in the position to further improve their locational qualities through low taxes or exciting social and cultural attractions. This is one of the main reasons for why spatial disparities as well as the level of socio-spatial inequality between (and also within) municipalities has further increased in Germany during the last decades.

The case of the Federal Republic of Germany illustrates that scholarly research on austerity must draw its attention to the big picture of multi-scalar and spatially unequal processes whenever possible. This insight should prompt not only researchers in academia, but also all those who envision and organise an emancipatory politics, to meet this challenge. The everyday politics of austerity  and the associated incremental implementation of normalisation and adjustment processes force us to develop emancipatory strategies based on everyday experiences. At the same time, however, the spatially unequal nature of austerity impedes the development of political projects that would be comprehensive and far-reaching enough for confronting the multi-scalar linkages of institutionalised austerity. But that’s another blog post.

Felix Wiegand is a researcher and lecturer at the Department of Human Geography (Goethe University Frankfurt, Germany) and works on (urban) austerity, crises and the transformation of statehood; Tino Petzold is a researcher and lecturer at the Department of Human Geography (Goethe University Frankfurt, Germany) and works on multiscalar austerity in Germany; and Bernd Belina is professor at the Department of Human Geography (Goethe University Frankfurt, Germany) and works on critical geography, austerity and criminology.

Austerity, security and conflict

abuaro01

policia-bogotaIn today’s post Alke Jenss reflects on the synergies between austerity, security and conflict in the Latin American context.

In the Americas austerity programmes are nothing new. Neither is the loss of sovereignty concerning economic and social policies. Think of Mexico’s debt crisis in 1982 which set off a range of structural adjustment plans focusing on spending cuts and privatization in the region, or think of Argentina in 2001, and the similarities to European crises and “crisis management” will jump to your eye. Or think of Chile, where the Pinochet dictatorship was representative of a liberalization laboratory deeply dependent on austerity measures and its repressive framing. Its imagery of necessities has carried on until today.

Now, there is talk of “intelligent austerity” supposedly needed to confront the structural reduction of growth in the region, based on the “end of the super cycle of raw commodities” (CEPAL). “Intelligent austerity” is supposed to avoid excessive cuts that would affect growth and thus taxes. The UN Economic Commission on Latin America (CEPAL) has warned that the cuts in (public) investment could lead to exactly that. So, austerity is once again on the table in Latin America.

One interesting example for renewed budgetary restraints on the national and the municipal level, considering the fall of commodity prices, is Colombia where one must ask what implications austerity politics has for the current peace process between the government and guerrillas. Three points can be made:

Firstly, the peace process hasn’t affected austerity measures even though original causes of the conflict have likely been exacerbated by cuts to public spending (extreme inequality, rural isolation, violent appropriation of land, missing life perspectives). Because of the fall of commodity prices of raw materials so central to Colombian the export structure, the cabinet has agreed to reduce the investment side of the national budget by 10 %. To combat the fiscal deficit is its central concern, especially since a fiscal balance-regulation was introduced in 2011; the Banco de la República’s high interest rates focus on inflation control. In 2016, the Santos government also tried to cut running costs by introducing an “Austerity Plan” for its own public administration personnel.

Secondly, austerity measures have not seriously undermined the exorbitant security budget. The armed conflict, interestingly enough, has never been presented as the costly undertaking it is, even though the expansion of the military budget between 2002 and 2015 in absolute terms is diametrically opposed to austerity – if you took the latter literally. The internal defence budget alone has revolved around 9 billion Euros since 2012 which are fed into the military fighting of guerrillas annually. Additionally one might consider costs of infrastructure damage. This makes it far more costly to maintain the war than to end it, even though the allegedly high payments to demobilized guerrillas were one point used by those opposing the peace deal subjected to referendum in October 2016. With this and other arguments focusing on the threats that FARC fighters represent to parts of society, the campaign for a ‘no’ vote succeeded . However the campaign leader, Álvaro Uribe, never mentioned that during his government term demobilized paramilitaries formerly involved in illegal economy were awarded ample support for setting up legal businesses.

Third, the politics of austerity deeply embedded in Colombian politics affect the chances for what we might call “sustainable” peace entwined with social justice. A transformative idea of peace which by definition encompasses social justice is hardly possible with an economic austerity policies, with so many people earning only minimum wage or being in long-term displacement with no realistic perspective to return to their villages. It is remarkable enough that the FARC guerrilla agreed to the peace process on the terms that the economic model as such would not be put under scrutiny. The agreements on agrarian reform might be far reaching but in a context favouring large-scale export focussed agrarian industries, where smaller producers under pressure and public investment is cut, reality will rather cement the extreme rural inequality co-produced by decades of forced displacement and violence directed at grassroots campesino movements.

The fourth point is relevant beyond the context of the Colombian conflict. It’s the punitive take on poverty that represents austerity policies’ flip side in Latin America. It will likely persist even if the peace deal is realized with some modifications due to the referendum: prison populations have grown excessively in the Americas (see the World Prison Brief), i.e. from 126/100.000 inhabitants in 2003 to 231 in 2014 in Colombia or from 156/100.000 inhabitants in 2003 to 214/100.000 inhabitants in 2014 in Mexico. Mexico is another fundamental example where the narratives of security and austerity feed into each other in simbiosis, yet affect only parts of the highly stratified society, while some, close enough to transnational capital flows and political, boast their cars and mansions on social media. It seems quite ironic that often, the latter have been union leaders on the one hand and sons and daughters of those entrepreneurs at least bordering on illegal economy with their negocios.

As UNDP reports for the region confirm, most inmates however, complemented meagre income with what is now called narcomenudeo (small scale selling of drugs) or committed crimes such as theft or robbery. They, as the clients consuming the by-products of the drug economy, seem to sit on the lowest steps of the social classification ladder. What role do these segments of population play for society in countries such as Colombia or Mexico? They fill in the large segment of low-skilled, informal and badly paid jobs whose access to social policies is worse than ever after historical structural adjustment has conflated already selective social security programs. The gruesome numbers of police killings and disappearances underline that these social sectors are denied the most basic rights based on class and racial classifications. Austerity and punitive measures are closely linked and reinforce each other. Arguments against a raise in minimum wage are usually based on austerity and the competitive advantages narrative. But as increases in minimum wage would mostly go into consumption this might even have positive effects on domestic demand. It would break the assumed linkage between reduced spending and more growth. As things stand, they provide a growing social base for illegal economy.

Security discourses in turn legitimize policies which leave out social questions or subsume them under a theme of threat. How this relation of austerity and the production of insecurity for parts of society plays out can be observed in contemporary Latin American.

Alke Jenss is a researcher and lecturer at Bielefeld University, Germany and has worked on insecurity and the state in Latin America.

Heathrow expansion: Six reasons why it should be seen as a failure of government

abuaro01

2000px-heathrow_airport_map_with_third_runway-svgIn today’s post Steven Griggs and David Howarth outline six reasons why the decision to build a third runway at Heathrow airport represents a failure of government, that will be hotly contested and continue to generate controversy well into the future.

In his statement announcing the UK government’s decision to support a third runway at Heathrow, the transport secretary Chris Grayling said that the decision was ‘good for Britain’ and that the new proposals were ‘best for our future, and best for the whole country and its regions.’ The ‘truly momentous’ decision to expand Heathrow, it is claimed, will improve the UK’s connections with the rest of the world, while increasing international trade and creating jobs.

Most business leaders and unions welcomed the long-anticipated decision, stressing its vital role in stimulating economic growth, especially in a post-Brexit world. Politicians across the divide, apart from the Greens and Liberal Democrats, rallied to support the government. Ominously though, Zac Goldsmith resigned his Richmond Park seat and collective cabinet responsibility has been loosened to accommodate dissenting voices, most notably Boris Johnson and Justine Greening. Meanwhile, Jeremy Corbyn and John McDonnell remain firmly opposed to expansion, though once again they stand opposed to most of their parliamentary party.

There is no question that more airport capacity at Heathrow and Gatwick is demanded by powerful forces and vested interests. The airports are running at 98% of their capacity, and the demand for more flights shows little sign of waning. For many commentators, economic growth and global connectivity will no doubt be fuelled by the expansion of the UK’s only hub airport, though precise levels are disputed.

But once the dust has settled, and the flag-waving and trumpeting ended, what are we to make of the decision? Is this truly a triumph of strong leadership, an end to ‘dithering’ and the confident action of a government of ‘builders’ committed to ensuring Britain’s future? Perhaps a little less spin and a little more caution would not go amiss. In reality, the May government’s support for Heathrow expansion is the outcome of a series of government failures and policy reversals, which is likely to end in tears. Here are six reasons why.

First, the belated decision to expand Heathrow is a failure of political leadership. It represents the inability of the Coalition government to keep to the line agreed in May 2010, when it declared a moratorium on Heathrow expansion. But the Conservative government has chosen not to stick with David Cameron’s ‘No ifs, no buts’ promise that there would be no new runway at Heathrow. Instead, appearing to buckle against an intense pro-expansion campaign led by business, supporters of Heathrow and London First, the Coalition agreed in 2012 to set up the Airports Commission and thus to reopen the case for more expansion. Indeed, the terms of reference of the Commission directed Sir Howard Davies to examine where the new expansion should be – Gatwick, Heathrow or even “Boris Island” – and not whether there should be expansion in the South-East of England at all. Finally, the aviation industry’s demand for hub capacity made it difficult to advance any serious consideration of spreading expansion across all London airports; not just Heathrow, but Gatwick and Stansted, as well as regional airports.

But, secondly, the Davies Commission failed to deliver ‘an evidence-based consensus’, which it was hoped would take the politics out of this controversial decision. If anything, the conflicts between different airports, between airports and their surrounding communities, amongst politicians (within and across parties, and between tiers of government), and between many environmental groups and business representatives, has intensified and looks certain to continue.

And, thirdly, seen in a longer historical perspective, it is the failure to recognise that the wrong decision was made to build Heathrow in the 1940s. Because it’s in the wrong geographical location, causing untold misery and suffering of noise pollution for all those residents and households languishing under its flightpaths, further expansion can only exacerbate such detrimental effects. In fact, the decision might be seen as a failure of path dependency and institutional inertia, which goes to the heart of the British state and system of government.

Here one only has to think of the Roskill Commission inquiry into the third airport at London in the late 1960s and early 1970s, and the delays surrounding the inquiry into Heathrow’s planned fifth terminal. Roskill’s findings were ignored by government in favour of a new airport at Maplin, only for government to abandon this plan, when the 1973 oil crisis hit the aviation industry and local MPs threatened to rebel. The upshot has been a reliance on the production and dissemination of a ‘fantasmatic’, have-your-cake-and-eat-it narrative – we can have airport expansion and environmental protection – in which the horrific threat of not acting, and thus falling behind our foreign competitors, is bolstered by the beatific prospect of adding billions to the British economy, if and when the new runway is actually built.

A fourth failure of the new scheme relates to the problem of air quality, which is the cause of major respiratory problems and premature deaths. The problem of meeting legally binding air quality targets in London (and surrounding areas) was not properly addressed by the Davies Commission and government plans to meet its 2030 air quality targets are highly contested, as the recent court case by legal campaigners, Client-Earth, goes to show. The idea that a reduction of car emissions in and around the airport, for example, will enable the expansion plans to meet the required air pollution targets looks wildly optimistic.

Fifthly, and crucially, the plans constitute a failure to tackle the problem of climate change. The anti-expansion coalition that successfully challenged New Labour’s 2003 Air Transport White Paper, which promised major airport expansion, put the problem of aircraft emissions and our international commitments to curb climate change at the centre of their campaign. Indeed, in setting out a broad consultation exercise about airport capacity in March 2011, the then Secretary of State for Transport, Philip Hammond, dismissed the previous thinking as ‘out of date because it fails to give sufficient weight to the challenge of climate change’. The previous Labour government had ‘got the balance [between environmental protection and expansion] wrong.’ Yet once again environmental considerations have been shoved into the background, both by the Airports commission and the wider public debate that has ensued.

A final and equally telling problem is that in all likelihood the plans will end in another disappointing failure to deliver a mega infrastructure project on time and within costs. Legal challenges by councils and other affected parties, the precise financing of the airport proposals – who, for example, will pay for the required surface infrastructures needed to ensure its feasibility? – coupled, of course, with the inevitable political challenges will invariably delay the implementation of plans – if it happens at all.

Already local councils are preparing to review the decisions and planning procedures in the courts, while local resident groups and direct action campaigners such as Plane Stupid are sharpening their preferred tools of protest. Indeed, we can expect the third runway at Heathrow to become a symbolic battle for environmental campaigners. Heathrow could well up being the next Notre-Dame-des-Landes, the proposed new international airport outside Nantes which continues to attract widespread criticism and protest across the whole of France and Europe.

Steven Griggs is Professor of Public Policy at De Montfort University and a core member of CURA. David Howarth is Professor in Social and Political Theory at the University of Essex

 

The hollowness of GDP: The case of Ireland

abuaro01

In today’s post Dr Daniel Bailey and Professor John Barry argue that Ireland’s GDP statistics highlight the disconnect between ‘official’ growth and the real economy, and raise questions about the nature of growth itself. This post was originally published by SPERI Comment and republished with their permission.

In the last decade, the prominence afforded to Gross Domestic Product (GDP) in political discourse has increasingly been challenged by a series of social and environmental critiques. These critiques – made by the likes of Wilkinson and Pickett, the Stiglitz Commission, theILO, and the New Economics Foundation – argued that policy-making ought to be sensitised to alternative metrics better suited to the socio-economic and ecological conditions of the present day. Recent GDP announcements in Ireland have only added to the contestations surrounding the political centrality of economic growth in political economy.

The credibility of the GDP statistic in Ireland was strained when the Central Statistics Office (CSO) announced that its growth rate for 2015 was 26.3%; far superior to any of the figures recorded during the ‘Celtic Tiger’ years of the 2000s. This figure was met with widespread ridicule, including by Nobel Prize-winning economist Paul Krugman who described it disparagingly as ‘Leprechaun Economics’.

The drivers of this growth spurt, according to official sources, were a series of ‘inversions’ whereby companies re-locate their official headquarters to Ireland, where only a minority of their business operations take place, in order to benefit from subjecting their profits to Ireland’s low corporation tax rate. This has included companies re-structuring in such a way that sees them legally transfers its assets or its intellectual property to Ireland despite the country only fleetingly hosting the economic activity of these companies. As a consequence, there was a simultaneous boost in net exports in 2015 as these multinational companies contracted non-Irish companies to carry out certain operations.  Such volatility in the GDP numbers is facilitated by the small and open nature of the Irish economy and its reliance on foreign direct investment, and by its 12.5% corporation tax rate which attracts multinational corporations looking for a foothold in the Eurozone.  The Irish Times have reported that Apple – whose exact tax arrangements with Ireland have been under some scrutiny recently – was one company responsible for the rise in Ireland’s capital stock, as well as AerCap in the aircraft-leasing sector. In addition, the robust defence of Ireland’s corporate tax arrangements by the current Irish government, and most of the opposition in the Irish Dáil (parliament), is telling and revealing in demonstrating the alliance and common interests between global corporations and nation-states such as Ireland.

In other words, although Ireland’s 2015 growth rate has some impact on governmental income and the debt-to-GDP ratio, it has only a diminishing connection to the performance of the ‘core economy’ and the reduction of unemployment. Prime Minister Enda Kenny, lost his parliamentary majority in February’s General Election not least because his appeal to the electorate on the campaign trail to ‘keep the recovery going’ was met with a response of: ‘what recovery?’.  The eroding credibility and meaning of the GDP statistic in Ireland was evident in such a debate, and the subsequent data released by the CSO will only further these perceptions.

The susceptibility of the Irish economic model to accountancy practices such as those seen in the ‘inversion’ strategies above mean that further volatility and the financial risks associated with it cannot be ruled out. Indeed, the 2016 economic data thus far forms an ironic postscript to the 2015 data as it shows that the economy has contracted so far this year. The volatility of the GDP measurement – an inherent component of the internationalised Irish economic strategy – means that it is highly problematic for either public spending or deficit reduction to be planned reliably on the basis of growth projections.  The contraction, however, tells us similarly little about economic trends such as the unemployment rate which have become increasingly disconnected from GDP levels; just as GDP has become disconnected from well-being, economic security or global poverty reduction.

Following Tom Healy, the methodological nationalism of GDP is disguising the existence of two economies operating within Ireland today. One is a very high-productivity, relatively low-labour intensive, export orientated and highly profitable economy.  The other is a low-productivity, high-labour intensive, domestically orientated and relatively less profitable economy.  Clearly this is a stylised depiction, but it does capture the misleading character of ‘single country’ and undifferentiated analyses of the ‘recovery’.

Therefore, alongside the credibility or usefulness of GDP we have to ask a connected but larger and more crucial question for modern political economy: who wants ‘jobless economic growth’? Posing the idea that GDP growth can be compatible with continuing joblessness does open up a possibility of delegitimising GDP growth.  This is based on the idea that for most people their support for ‘economic growth’ is not based on corporate profit-making or reducing government debt-to-GDP ratios, but based on strategies for growth producing jobs, and ideally high-paying, good quality jobs at that.

This is not a problem unique to Ireland. To differing extents, capital flows in many countries distorts the original premise of its ascension in political discourse.  The increasing mismatch between economic structures and the conventional statistical framework developed more than 70 years ago has recently prompted Diane Coyle to suggest that the ‘path dependency’ of the latter is now threatened more than ever by a coalition of interests seeking to develop alternative indicators more suited to the ecological, economic and societal challenges and opportunities of the 21st century.

Ireland, however, is a particularly extreme example of GDP serving an increasingly misleading and irrelevant measurement not only wellbeing, but also for the wealth of the nation. As such, the GDP growth figure has rarely been as ethereal or mythical as it is in Ireland today. But more than that, the hollowness of the statistic for the lives of the Irish people means that it is even more important for Ireland to develop a notion of national prosperity or success which goes far beyond conventional understandings of economic growth.  If ‘jobless economic growth’ is not working, can we begin to move our political economy thinking beyond GDP growth to envisage political economies of job rich non-economic growth?  If the Irish experience of ‘jobless growth’ is a discredited form of ‘Leprechaun economics’ (which should really perhaps be called ‘corporate profit shifting economics’), what do we put in its place in a ‘post-growth’ political economy?

Dr Dan Bailey is a Researcher as the Sheffield Political Economy Research Institute, and John Barry is Professor in Politics and International Studies at Queens University, Belfast.

The Visible Hand: George Osborne and the Labour Market

abuaro01

CURA’s Professor Phil Almond writes about contradictions in  labour market policy that are apparent in the government’s March 2016 budget.

George Osborne’s Budget appears to have been a much less successful exercise in fostering hegemony than his immediate post-election efforts. This is perhaps unsurprising given the contradictions involved in the joint pursuit of austerian governance, traditional Conservative clientelism, and the attempt to manage Conservative Party tensions on Europe through the mechanism of a referendum on European Union membership at a juncture where populist anti-elite pressures of varying political stripes are widespread and growing.

To an employment relations researcher like myself, contradictions are particularly evident in the labour market sphere. In particular, it is worth thinking about the relations between the legislative attack on trade union freedom of the Trade Union Bill (which coincidentally sustained non-fundamental, but non-trivial damage in the House of Lords on the the day of the budget), the National Living Wage, the continued confusion around the introduction of an Apprenticeship Levy, and the wider approach to political economy of the current government.

Of these, the Trade Union Bill is the simplest to decipher, representing as it does a straightforward continuity with Thatcherism. Nobody with experience of the 1980s and 1990s history of regulation of industrial relations would be particularly surprised that a Conservative government would pursue such policies. In industrial relations terms – ignoring for the time being the obvious partisan attack on Labour Party funding – most commentary seems to have concentrated on the increased balloting thresholds for strike action, and to a lesser extent on the issue of trade union facility time. Important as these are, it is regrettable that the proposal to lift the ban on using agency workers to replace permanent staff during strikes, which represents a fundamental challenge to the right to strike as understood in ILO conventions, has not taken greater prominence in the debates on and opposition to the Bill.

The National Living Wage and Apprenticeship Levy, however, need somewhat more thinking about. Having worked as a researcher on wage protection at the time that the National Minimum Wage was proposed and introduced by the first Blair government, and witnessed the extent of Thatcherite-Conservative opposition to the “interference” in the labour market that statutory wage protection represents, it is clear that Osborne represents something of a departure here from Keith Joseph.

Readers of this blog presumably do not require an employment relations academic to point out that the current upgrading of the minimum wage does not represent a progressive policy, coming as it does in the context of a shrinking of the benefits system that of course is profoundly regressive. It is also worth noting in passing the “National Living Wage” is nothing of the kind – any basic or minimum income level, however calculated, clearly has to be expressed on a weekly or monthly basis. Very obviously, if sustenance comes from waged labour, then an hourly rate is only as good as the multiplier of how many hours of work are paid for. Given those at the bottom of the labour market are generally on marginal part-time or zero-hours contracts, a vocabulary of “living” wage is not appropriate. That George Osborne is prepared to use this language as part of a hegemonic strategy is one thing, but those in favour of redistribution to the working poor should not.

Nonetheless, proposing non-trivial increases to minimum wages, in the context of austerian governance, does represent something of a change of thinking as to how the right goes about shrinking the state. The Thatcherite position of avoiding ‘constraints’ on employers in order to encourage the free market to clear has morphed into a position where the over-riding imperative is that the poor are not sustained by the state, even if this involves what a previous generation of Conservatives would have termed “interference” in labour markets. Whether George Osborne is a convert to established social democratic arguments that increasing minimum wages has positive effects on productivity is unclear. Still, to some extent, austerity seems to have trumped the “old school” brand of neo-liberalism of the Thatcher/Major era.

This is also the case with the apprenticeship levy; essentially, a pay-bill tax on large employers to be dedicated to apprenticeship training, sweetened in the Budget by a government top-up. How this will work, in particular what the resources raised will be used for in an, at-best, confusing system of initial vocational training, is unclear. However, some of the motives are not dissimilar to the minimum wage increase; vocational training needs to be improved, and the state does not want to bear the financial or coordination costs, notwithstanding the exceptionally poor degree of coordination between firms on skills and training in the UK. It is worth noting that in my conversations with practitioners aiming to attract foreign direct investment to the UK, it is clear that the idea of a levy has a substantial degree of opposition from mobile firms, including many that do require advanced skills. Again, while individual labour market policies need to be looked at within the context of the overall political economy and distributional policies of the government, it remains interesting that the Osborne strategy does in places require a fairly visible hand.

Phil Almond is Professor of Comparative Employment Relations at DMU, a member of CURA and CROWE, a DMU-based research group on organisations, work and employment.

Participatory Budgeting: Shining light on the well manicured hands on the public purse.

abuaro01

Jez Hall from the Participatory Budgeting Network argues that the costs are spiralling of a public service culture that is focussed on acute interventions, increasingly relies on private delivery and is driven by the interests of professionals. He argues that participatory budgeting is a tool that can deliver fiscal responsibility and make services more focussed around the needs of citizens.

Advocates for more citizen participation usually discuss Participatory Budgeting, (and similar ideas for direct democracy) as a democratic enhancement – something about fixing democracy, trusting in politics or getting involved. It is as though involvement is the aim.

But a too often undervalued dimension is the cost benefit of participation. We live in expensive bureaucratic systems, where the recurring costs of services make no sense to ordinary people. I believe we need to raise the debate when looking at the different public service choices. Because, from observing Participatory Budgeting  (PB) in action, when given a choice, and good information, and a chance to deliberate ordinary citizens back prevention over an often ridiculous status quo that wastes money and blights lives by focussing on the wrong end of the system. When there is pressure on public budgets it matters who has a say, and who sets the agenda.

Here’s an interesting set of statistics:

“It costs £65,000 to imprison a person in this country once police, court costs and all the other steps are taken into account. After that it costs a further £40,000 for each year they spend incarcerated.” £100,000 for a one year prison sentence. Once you have been into prison you are pretty likely to return. Or suffer limited employment opportunities for your whole life, and you and your family more likely to become dependent on welfare.

Private sector outsourced care for at risk young people can be much expensive and the outcomes often little better. “There are differing views amongst commissioners about the relative costs of their own children’s homes provision to those of the external providers. The DfE Children’s Homes data pack (December 2014) concluded that average unit costs are … around £2,900 per week”. A 2013 survey indicated the most common cost of high intensity outsourced care was £3,000 per week, rising in rare cases to £6,000 per week. That equates to between £150,000 to £300,000 per year.

Then, at the other end of the spectrum, it costs about £5,000 per year to provide a school place in a city like Manchester. So one year of a young person attending school costs about the same as spending 2 weeks in prison, or maybe just a week in intensive residential care.

In health the story is much the same. The unit cost of attending an A&E department is far higher than seeing a GP or community based health worker. This statistic is out of date but still relevant. In 2010 to walk through the door of an A+E department for a brief consultation cost over £125. That’s before receiving any treatment. Yet I, and probably most citizens of the UK, used to free at the point of delivery healthcare, are horrified by the prospect of paying £25 to see a GP, as proposed by the Kings Fund in a report in 2014. “An influential think-tank has recommended the Government considers charging patients up to £25 for a GP appointment, becoming the latest in a series of recent reports mooting the controversial move.”

Best keep people out of prison, hospital and children’s homes then. That requires prevention, something that can only be effectively delivered outside these expensive institutions and within communities. Neighbourliness, good employment, education, and stable families matter a lot, but sometimes it takes professional support to prevent the most at risk going off the rails.

Now, I wonder how much employing a trained youth worker costs? The answer is “around £21,000 a year” – rising to about £35k max – there will be some on-costs on that basic figure, but it gives us a perspective.

And a prison governor earns upward of £180,000 for a difficult high security prison, but more normally “salaries for qualified operational managers start at £32,000 a year, while more senior managers (including governors) can earn around £60,000 pa. It’s a professional salary, but hardly ‘riches beyond the dreams of avarice’… Of course, there are other benefits, including a civil service pension.” A judge earns £130,000 or so. And judges are most unhappy about it. “Almost a third of judges, 31%, said they would consider leaving early in the next five years. The proportion was even higher for high court and appeal court judges. Declines in pay and pensions were the main complaints. Nearly four-fifths said incomes now and after retirement do not adequately reflect the work they do and that they had suffered a loss of net earnings over the past five years.”

It’s tough looking down on society from the top. If the people involved in commissioning services are the people already managing, running or benefiting, there is an obvious bias to backing their own professional approach. That isn’t corruption. It’s human nature. Yet, however well intentioned and informed they may be, it is a capturing of the system by those already benefiting most from it. As a leading public health manager for a big city once said to me “prisons exist to pay for prison staff pensions, and hospitals to pay for consultants golf club memberships”.

This might be a little unfair. But if you care, and professionals in the public sector do care, without a robust process of challenge there is no strong incentive to reduce one’s own role. We have become wedded to expensive sticking plasters that may contain but don’t prevent problems. This was clearly identified in a 2011 report on the future of Scottish public services that raised the problem of ‘producer dominance’. Basically public sector commissioners, left to their own devices, prioritise existing approaches, and de-prioritise prevention. “Government remains the dominant architect and provider of public services. This often results in ‘top-down’, producer- and institution-focussed approaches where the interests of organisations and professional groups come before those of the public.”

Maybe PB can shine a light on that problem – and save taxpayers a bit of money. Putting one less person in prison for a year could pay for at least 3 youth work posts – and who knows how many hundreds of hours of volunteer time at a community based youth club. Each youth worker, properly supported, could prevent a young person being abused, or going to jail. If they stopped just one conviction or referral per year each, then prevention is still a great investment.

Of course there may be lots of solutions, like funding voluntary and community sector providers. Though we need to be careful. The lesson of the Kids Company is that these decisions can’t just be left to politicians either. “Despite lacking robust evidence about the quality of the charity’s outcomes, value for money or governance, Kids Company attracted high profile support from senior Ministers throughout successive Governments, and tens of millions of pounds of public money have been handed to the charity over the course of its existence”.[1]

Whilst I believe in high quality, preventative public spending, that doesn’t mean the money can’t go outside the public sector. But when it does, either to ‘not for profits’, or private sector provision citizens need to be aware of the cost and benefit of that choice. If they were, I doubt that private financing would be as widespread as it is, given its costly nature.

Participation is not just about validating pre-determined choices of so called experts. It is about deliberating between options, suggesting new approaches and making more informed choices. So let’s have a better approach than tick box consultations. Let’s shine a light on some of these costs. Open up how we make these decisions and let the people decide?

Jez Hall is a founding member of Shared Futures. Jez helped found the PB Unit in 2006 and has since then remained a committed advocate of Participatory Budgeting.