austerity

Governing Austerity in Leicester

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This post outlines the main findings from the first round of research carried out by Prof. Jonathan Davies and Dr. Adrian Bua in Leicester as part of the collaborative governance under austerity project sponsored by the Economic and Social Research Council as part of its Urban Transformations Network. It will be followed by a further seven publications relating to the comparator cities of Athens, Baltimore, Barcelona, Dublin, Melbourne, Montreal and Nantes.

Leicester has experienced several waves of industrial decline and restructuring over the past 40 years, leaving it with high long-term unemployment and income poverty. The crisis of 2008 and ensuing national austerity regime intensified these problems.  In 2013, ONS statistics suggested that gross disposable household income in Leicester was the lowest in the UK.  In-work poverty persists at very high levels with full-time workers earning less than 80% of the national average.  These conditions mean that many citizens rely on public welfare. However, our research suggests that benefit cuts, continuing policy reforms and the government’s sanctioning regime have hit the city very hard in the eight years since the crash, leaving many unable to meet their basic needs, and eroding the social fabric that people depend upon to participate effectively in social, political and economic life.

In this project, we are looking at different ways in which austerity is governed and contested.  Who gets to have a say and how?  The national context is that despite George Osborne’s “localism” agenda, English cities still have little financial room for manoeuvre – deficit budgeting has long been illegal and the power to levy taxes is minimal. Since the 1980s, UK authorities have largely avoided confrontation with government. One councillor quoted in the Leicester Mercury commented on the implications for austerity: “we are not happy making cuts but we cannot set an illegal deficit budget. If we do Eric Pickles will simply come in and take over the running of the council”.  This comment captures Leicester’s approach, which we call “austerity realism”.  By austerity realism, we mean that the city applies cuts regretfully, but diligently, because policy makers cannot see any alternative..

Leicester City Council estimated last year that by 2019, it would have lost some 50% of its budget over a decade. Its goal is to manage down demand for services and mitigate the impact of austerity for those worst affected, while trying to avoid dramatic headlines and conflicts with central government.  Anti-austerity activists have mixed views about this strategy. They mostly accept that it is impractical for local authorities to defy Westminster and set expansionary anti-austerity budgets, but argue that there is room for manoeuvre.  One commented on twitter in response to a CURA blog on localism, that Leicester City Council could agitate against austerity and plough reserves into sustaining services – ideally as part of a concerted national strategy of municipal resistance.

As we explained in the project overview blog, our exploratory research focused on the relevance of the “collaborative moment” for austerity governance, the idea that networks sustained through trust could be a new and exciting way of governing complex problems, ushering in a new era of empowered participatory democracy.  In Leicester, many respondents see working in partnership with others as good sense, but without any idealism.  As one VSO respondent put it, “the only way to compete is to collaborate”.  Collaboration was seen as a functional and practical tool for austerity management, and some respondents thought austerity had made collaborating easier by concentrating minds.  On the other hand, attitudes to collaboration were strongly influenced by austerity realism, lacking any optimism about the potential in networks for democratic revitalisation and social flourishing.  In practical terms, this means that while public engagement is a high priority for public authorities in Leicester, many of our respondents think that participatory governance is a pale shadow of the New Labour years – a period for which there was some nostalgia.

Within this broad ethos of austerity realism, we see four basic tactics and strategies: amelioration, rationalisation, co-production and development.  We explain each and highlight associated dangers and criticisms.  We conclude by looking at what the research suggests about the vexed problem of how to resist and exit austerity.

Amelioration: The Department of Work and Pensions (DWP) exercises a formidable grip on the lives of benefit claimants in Leicester under a regime that regulates, disciplines and punishes – what academics call “workfare”.  Those who fail to meet stringent work-search targets receive a “sanction”, which means a punitive cut in benefits.  While sanctioning has eased in the past year, it has affected many thousands of people in Leicester. National research shows that the workfare regime causes widespread destitution.  In Leicester, agencies from the statutory and voluntary sectors aim to pick up the pieces.  The capacity of public and voluntary organisations to work in partnership is seen as vital for plugging the gaps through advice and emergency payments. One danger is that while these networks do good work, they are under the constant and growing stress of having to do more with less.  With further cuts ahead, a priority for us is to explore whether the system of advice, discretionary and emergency payments will remain sustainable without either further rationing or a dramatic improvement in the local jobs economy.

However, our research draws particular attention to the “invisible” effects of destitution.  We know anecdotally that the welfare regime drives some people “off grid”. Young claimants in particular are prone to giving up on the benefits system, at which point they disappear from official records.  The numbers are unknown, and nor is there much evidence of what happens to them beyond the demand for emergency payments and food parcels. Do they fall back on family; do they find formal or informal work of some kind, resort to crime, or migrate out of the city?  Respondents suggested that some affected groups find support in family and friendship networks, while others – particularly in traditional working class neighbourhoods – lack those resources and are disproportionately affected. The critical question moving forward is whether communities in Leicester and across the UK can continue absorbing the costs of destitution and disappearance. Or, will a breaking point come, making the crisis “visible” once more in the form of angry protests?

Rationalisation: some critics of austerity nevertheless concede that the public sector could be leaner and work “smarter”, as one respondent put it, even after decades of efficiency measures.  The view is that rationalising services and delivering them in partnership is a way of implementing austerity while minimising cuts to the front-line. However, we heard from front-line workers in both the statutory and voluntary sectors that restructuring reduces the time they have to work with communities. Moreover, some respondents were critical of the rationalisation discourse, pointing to the impact of cuts on the front-line.  Debate about the city’s approach to homelessness exemplified the difference between those who believe reorienting the service from provision to prevention can deliver services more effectively, and others who think it hits client groups hard.  The message is that efficiency savings do not absorb the full impact of austerity.

Co-production is the idea that citizens and community organisations can run public services, with support from public agencies. This agenda is popular with organisations wanting to promote the “commons” – the expansion of “social” goods beyond the state and the market.  Leicester recently agreed a first-wave of asset transfers under the Transforming Neighbourhood Services programme. Facilities are leased to community groups on condition that they continue to provide for all.  A danger is that community groups have little time or expertise for facilities management and that such arrangements will not prove sustainable. More broadly, cash-starved community organisations have fewer opportunities to win ever-bigger government contracts and grants are now exceptionally scarce. Local voluntary organisations must form consortia to stand any chance of competing with outside bodies – big charities and corporations often with little or no connection with Leicester.  The danger for advocates of “commoning” is that austerity erodes the fabric of local civil society and “co-production” becomes a figleaf for privatisation instead of a vehicle for empowerment.

Development and growth:  Most of our respondents see Leicester as a city “on the up”, buoyed by a cultural and sporting renaissance and the proud heritage of multi-culturalism.  The role of the Mayoral system adopted in 2011 and the leadership style of the Mayor himself, were often cited as explanations for the renewed focus on urban development.  As in many cities, growth, investment and job-creation are seen as the only viable solutions to Leicester’s poverty and unemployment. But, this is not a win-win option for everyone.  The concern among critics of the Mayor’s approach is that if the city does achieve an economic renaissance, those in deprived areas will not benefit and become further marginalised.  Moreover, getting the right kind of employer into the city will remain a huge challenge, even in an improved investment climate.  Leicester needs many thousands of good quality jobs. International literatures suggest that urban “boosterism” rarely delivers for those most severely hit by austerity and neoliberalism.  Building a socially just city through economic competitiveness would require Leicester to buck this powerful trend.

Viewed in an international context, especially our comparator cities of Athens and Barcelona, resistance to austerity has been very muted – certainly since the brief national upsurge of spring 2011.  There have been lively anti-austerity protests in Leicester, with unions playing an important role alongside local campaigns against national welfare reform and local cuts to hostels and community centres.  However, no durable anti-austerity movement has yet emerged on any scale in Leicester, or in the UK.  The research points to multiple inter-related explanations, including lost traditions of struggle linked to the legacies of industrial and trade union decline.  Another possibility is that low mortgage rates and low inflation afforded some protection against stagnating incomes for those in stable employment, muting protest and isolating people trapped in the workfare regime.

Austerity has a seemingly vice-like grip on England and it is not easy to see beyond it. At the same time, several respondents mentioned Jeremy Corbyn’s election to the Labour leadership as a weathervane of change and foresaw potential tipping points ahead.  The next phase of our research will look in more depth at how different actors in cities govern and organise around crises and social change. In Leicester, we hope to extend our study to explore the impact of austerity on the governance of migration and multi-culturalism, neighbourhood services, local economic development and adult social care and health.

Professor Jonathan Davies is Director of CURA and principal investigator on the collaborative governance under austerity (CGA) project, Dr. Adrian Bua is a core member of CURA and research assistant on CGA.

How is Austerity Governed in Cities? Our First Reflections on International Findings

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We are pleased to launch a series of 8 further publications outlining the findings from exploratory research the 8 case study cities – Athens, Baltimore, Barcelona, Dublin, Leicester, Melbourne, Montreal, Nantes and Sydney – of the collaborative governance under austerity project, sponsored by the Economic and Social Research Council as part of its Urban Transformations Network. In this initial post, Professor Jonathan Davies provides an overview of the emergent findings from exploratory research across the 8 cases.

In the 1990s and early 2000s, intellectuals, policy makers and activists all became enthused by networks.  They reasoned that at a time of greater prosperity than ever before, conflicts along the lines of class, race and gender could be broken down and a social consensus sustained through trust. Networking could coordinate a public sector fragmented by new public management and foster partnerships across state, market and civil society.  For the most idealistic thinkers, it could transcend social cleavages and usher in a revitalised participatory democracy, overcoming the limitations of market competition and government hierarchies. We use the term “collaborative moment” to capture this wave of excitement about networks, which emerged in the aftermath of communism and waves of neoliberal restructuring.

Is the collaborative moment still with us? The first phase of our research explored this question in eight cities – Athens, Baltimore, Barcelona, Dublin, Leicester, Melbourne, Montreal and Nantes.  We were particularly interested in whether it influences governing philosophies and practices after the 2008 crash, a conjuncture in which many cities face degrees of austerity budgeting with public service and welfare cuts, spiralling fees and charges, privatisation, foreclosures and severe unemployment and poverty. Over the next few weeks, we will post blogs from each of the research teams telling the story of their city, so far. The following paragraphs highlight some key messages.

First, it is clear that austerity bites very unevenly in time and place.  The perceived economic and political significance of the 2008 crisis varies widely. It has far greater impact in European cities than in Baltimore, Melbourne or Montreal. And, while 2008 was a crucial moment for Athens, Barcelona, Dublin and Leicester, it was not in Nantes.  Equally, some cities have been exposed to the full force of the economic crisis and turbo-charging of austerity urbanism, while a sense of business as usual persists in others, albeit with risks and threats on the horizon. Governing strategies differ too, depending for example on local political traditions and the powers and resources (or lack thereof) invested in public institutions at the urban scale. For example, where deficit budgeting has long been strictly prohibited in UK local authorities, it was commonplace in Spain until the austerity regime prohibited it in 2011 and it still is in France.

Concerning our core question about the resonance of the “collaborative moment”, the research shows that cooperation between government, business and civil society organisations remains very important, as has always been the case.  However, the politics of collaboration bear little resemblance to the idealised model of network governance.  It is not that the idealism of network governance has disappeared altogether – it is prominent among local elites in Nantes.  The problem is that even when the ideas retain some influence, they become subsumed in state-centred practices, enmeshed in realpolitik or overtaken by political activism against austerity. For example, we found instances where activists distance themselves from dialogue with the state, questioning its relevance and purpose – notably Barcelona, Dublin and Montreal. So far, our inquiries do not suggest that the “collaborative moment” is a critical theme in the urban politics of 2016.

In the second phase of our research between now and summer 2017, we will take a step back from the immediate questions of austerity and collaboration, developing a broader focus on the urban governance of rolling welfare state crises. We ask how different social actors organise around the multiple waves of dislocation and restructuring, experienced in different ways and at different times in all our cities, since the heyday of welfarism in the 1950s and 60s.  The research will endeavour to show how some strategies and alliances succeed and others fall by the wayside, and draw lessons about the future of urban and local politics.

Jonathan Davies is Principal Investigator on the Austerity and Collaborative Governance Project, as well as Director of CURA and Professor of Critical Policy Studies at De Montfort University

Local Enterprise Partnerships, Skills Strategies and Austerity

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In this post Jonathan Payne introduces a CURA-funded scoping study that he is carrying out with Phil Almond and Jonathan Davies into the role of local enterprise partnerships in developing skills strategies in a context of austerity

Many commentators on skills policy in England have long argued that the approach has been too narrowly focused on boosting the supply of skills without paying sufficient attention to employer demand for skill and the need to ensure that skills are put to productive use in the workplace.  The approach reached its height during the New Labour years when government set national skills targets and tried to use the power of the public purse to boost skills supply. By 2010, this approach was clearly running into problems, with major issues around ‘over-qualification’ and the ‘under-utilisation of skills’. Indeed, the UK Commission for Employment and Skills has argued that unless these problems are addressed, the UK will struggle to address its ‘productivity problem’.  Put simply, skills policies are likely to work better if ways can be found to integrate skills supply, demand and utilisation. This means linking skills supply with economic development and business improvement.

Progress has been very slow, and it might be argued that austerity only makes matters more difficult. However, the fact that government now has little money to throw at the ‘skills problem’ may open up opportunities for new thinking and approaches. The current government also wants to develop ‘employer ownership of skills’, which really means getting employers to pay more for training rather than relying on government support. Again, however, substantive progress is unlikely to be made unless ways can be found to raise employer ambition around skills. This essentially means impacting on local economic development as well as the way employers compete and design jobs which shape their actual skill requirements.

Enter local enterprise partnerships (LEPs), the new kid on the block when it comes to sub-regional economic development. LEPs bring together local councils and businesses around a wide ranging agenda, which includes economic development and skills, and occupy a complex institutional landscape involving Combined Authorities, City Deals, City-Regions, Enterprise Zones and more.

Amongst other things, LEPs are grappling with the challenge of developing more locally responsive, ‘demand-led’ skills strategies which feed into their strategic economic plans. However, they have courted controversy in terms of whether they are locally accountable, and whether they have sufficient powers and resources at their disposal to make a difference. What local actors understand by a ‘demand-led’ approach to skills is also unclear. Is it about responding to employer needs through better skills matching or is about raising employer demand for skill? How can ‘employer demand’ and ‘learner demand’ be combined, and does the current funding regime for skills help or hinder matters? For example, more adult funding is being routed through LEPs, while adult loans prioritise individual choice, with labour market intelligence and careers advice expected to square the circle. National targets and priorities also remain, in terms of the number of apprenticeships for example, while the new ‘apprenticeship levy’ is national rather than local in approach.

Policy has responded to criticisms around LEP capacity by boosting their core funding and is seemingly prepared to devolve more to ‘city-regions’ if they can make a strong case and satisfy certain government criteria. The question is whether this is a real step forward and if it goes far enough? Is central government serious about decentralisation and localism, or is it just handing local actors a set of problems without the means to really address them? Are we talking about the devolution of power or the offloading of responsibility? Local actors, with varying capacities, however, may try to run with this and see what can be done. An important question for research then is what progress can they make in developing an integrated, demand-led approach to skills which is long overdue, given the current policy dispensation?

Jonathan Payne, Jonathan Davies and Phil Almond are currently exploring these issues through a CURA-funded research project looking at the skills agenda for LEPs in the Midlands. Scoping interviews are currently being conducted with LEPs, local authorities, further education colleges and employer bodies with a view to understanding the issues on the ground, what progress is being made and the challenges local actors are coming up against.

On the 16th and 17th of May CURA will be hosting a workshop on Local Economic Development to discuss research agendas around local economic development and skills in England, if you are interested in attending please email Suzanne Walker swalker@dmu.ac.uk to register your place.

Jonathan Payne is a CURA member and Reader in employment studies at De Montfort University.

Book Review: What a Waste – Outsourcing and how it Goes Wrong

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In this book review, CURAs Dr. Heather Connolly shares her thoughts on the recent book by Researchers at Manchester Capitalism “What a Waste”. This blog was originally published on the Sheffield Political Economy Research Institute’s website.

With increasing numbers of failures and fiascos of outsourced contracts hitting the headlines, the question ‘when will governments ever learn?’ springs readily to mind.  A hard-hitting new book, by researchers at CRESC/Manchester Capitalism, entitled What a Waste: Outsourcing and how it goes wrong have criticised the ‘disastrous’ practice of UK government outsourcing, but argue that the failures and fiascos are effectively pre-designed.  The authors state that ‘there is an overall logic to the process which costs citizens because outsourcing is what happens at the intersection between the political convenience of the (central state) and the opportunism of outsourcing companies and investors’. Outsourcing allows the shift of blame to private sector providers, and government abdicates responsibility for providing underfunded services and ‘toxic activities’ (border control, for example) in favour of private firms with poor management control.

‘The franchise state which exists to award and monitor contracts at the same time strips itself of institutional resources and intelligence previously used to deliver goods and services.  As outsourcing proceeds, the (central and local) state is increasingly disabled in that it no longer has the capability to deliver public services.’

This situation means that giant contractors and the state become bound together in a form of co-dependence and when it goes wrong the blame can easily be laid on outsourcing contractors or the individual public servants who wrote the contract, rather than the government.  Contracts typically cover mundane activities which too often allow profit taking at the expense of the tax payer and the workforce by outsourcers who do not make capital investment or take market risk.

In the last few months there have been a number of failures and fiascos in public sector outsourcing contracts.  In December 2015 a £160m contract between Cornwall County Council and corporate giant BT was scrapped following a High Court ruling.  The 10-year deal, signed in March 2013, was for BT to run IT, human resources and other services for the council. BT tried to fight the Council’s decision to end the contract after only two years but a ruling was made against them stating BT did not provide ‘the service it had promised to the standard it had promised’.  Again in December 2015 an £800million older people’s care contract in Cambridgeshire ended after just eight months because it was ‘no longer financially sustainable’.  These are some of the more ‘mundane’ failures that tend to slip under the radar, not to mention some of the more controversial outsourcing fiascos such as the recent G4S ‘red doors’ for refugees in Middlesbrough or the Clearsprings ‘coloured bands’ for asylum seekers in Cardiff.

What a Waste points out that there have been various experiments around outsourcing in local councils, notably in Birmingham and Barnet.  Barnet was labelled ‘easyCouncil’ by critics that complained services resembled low-cost, no frills airlines such as easyJet.  Other councils, such as Essex, Southampton City, Suffolk and Staffordshire have also taken up the outsourcing model.  However, as they allude to in the book, Northampton County Council (NCC) is taking the process a step further by transferring 3,850 of its 4,000 employees to 4 new dividend-paying service providers which would deliver all the council’s services, including social care for the elderly.  The Chief Executive is pushing through with plans to begin outsourcing the services in a move which he says will make a £148m saving by 2020, though some fear the plan is a step towards privatisation.  Under EU Procurement Law these contracts will have to go out to tender after 3 years, so fears of effective privatisation are well-founded.

The ‘commission-only’ model being adopted by NCC is likely to be increasingly replicated in Conservative-controlled shires and urban areas.  The fact that there is no real reflection as to how these activities will function under this ‘next generation’ council model is evidence to support many of the arguments in What a Waste.

‘The democratic tragedy of the franchise state is that today’s mainstream politicians are not protesting (or even examining) the outcomes of outsourcing but are planning to grant ever more local monopolies from which organised money can take profits (in many cases without the capital investment or revenue risk which legitimate capitalist profit)’.

In a context of austerity, TINA (There Is No Alternative) is brought to the fore in discussions around the need for cuts to local services, and therefore resistance feels muted.  The authors argue that there is an urgent need for resistance around outsourcing as it is spreading though to sectors which should remain under some form of state control:

‘the failure of politicians and policy makers to protest outsourcing has become an urgent matter because the state has outsourced or is now outsourcing services which are part of what we call the ‘foundational economy’ in health, adult care, welfare and security.  Many of these services are or will be used by most families or individuals because the foundational economy is the basis of material security and the infrastructure of civilised life for the whole population’.

The authors of What a Waste argue that government outsourcing should be curbed by politically agreed prohibitions on outsourcing which is not in the public interest.  In an interview for the book one of the authors, Professor Karel Williams, put forward three principles for public sector outsourcing: firstly, no large scale outsourcing in local government where officers and members do not have the expertise to negotiate contracts; secondly, no outsourcing of ‘politically toxic’ services like border controls because government should take responsibility for what it does; and thirdly, no total outsourcing of any important service like provision of care homes because the public sector needs its own expertise.  It seems unlikely that the current government will take heed of any of these principles.

What this book does not offer is a comprehensive strategy for resistance and the ways in which organised groups against outsourcing can fight the plans.  Past experience shows that even where campaigns have had wide levels of support and have made small gains, they have not been sufficient to block major outsourcing plans from going ahead.  A strategy of resistance needs a co-ordinated approach involving multiple groups which means drawing on the different sources of power both in and outside workplaces, organising in the community and through media campaigning and political lobbying.  Two key challenges for building resistance are first, the willingness to act, particularly among local government workers, where a culture of fear may be developed around whose job is ‘at risk’ as a result of outsourcing.  Second, with such campaigns comes the question about the alternatives to outsourcing.  Labour branded its approach to running Lambeth as the ‘John Lewis’ council operating on the basis of mutual and co-operative values. Is this the ‘least worst’ alternative that could be fought for at a local level?

Dr Heather Connolly is Senior Lecturer at the Leicester Business School at DMU, and a core member of the CURA team.

The austerity-security symbiosis

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There are different ways in which austerity and security come hand in hand in contemporary political affairs. Three examples include Greece’s financial crisis and the socio-economic and political insecurity generated from the ideological disputes on whether to carry on with neoliberal driven polices promoted by the Troika; the British austerity narrative promoted by the Conservatives alongside policies and bills preventing terrorism (i.e. Government’s Draft Investigatory Power Bill) and narratives of human rights which, while aiming to provide an environment of welfare and wellbeing for all, tend to be driven by mechanisms that authorise state actors to use force and repression (i.e. housing eviction officers) on the one hand, and to facilitate (or control) citizen participation initiatives (i.e. neighbourhood renewal partnerships in the UK and the US or citizen security programmes across Latin America where police are a key partner on the other.

I argue that security and austerity are two different narratives whose convergence has consolidated in the 21st century.  Their symbiosis cuts across different dimensions of analysis: from the macro to the micro level and from the remote sphere of the global financial system to the concrete sphere of people’s daily lives. We cannot assert that one depends on the other in a unidirectional way. Instead, they feed into one another and they reinforce and benefit from one another. Three premises help me to explain this symbiosis.

I will borrow the phrase by Owen Worth to explain the first premise: austerity as a defence of neoliberalism. This premise sets the foundation of power differences between the powerful (protector) and vulnerable (in need of protection), which are implicit in the relationships developed behind any understanding of security.  This premise has been helpful to insert fear of the social instability that a fiscal/financial crisis may bring about, especially if irresponsible public or private debt is not restrained. The 2015 elections in Greece to stay in or out of the European Union or the Cameron-Osborne decision to incur in policies of fiscal austerity (low taxation and budget cuts, followed by an accentuated retreat of state services) are good examples that portray that if austerity is not pursued chaos, collapse and disorder will rule society instead. Therefore, austerity becomes a weapon to defend the middle and lower-income groups of the population from the undesired consequences of a fiscal/financial crisis that if untackled, in a later stage, contributes to political and social anxiety -as people begin to fear losing their jobs, savings, and welfare support (which they lose anyway)- while encountering protests and social revolts that increase perceptions of insecurity.

The second premise states that ‘austerity needs of security’; it derives from debates on the legacies of authoritarianism co-existing alongside neoliberalisation. The Latin American case is a good example to develop this point. In the 1980s, after neoliberal economic reforms were introduced in the region (characterised initially by a long-term fiscal austerity period), several governments began losing legitimacy as the safety nets that the state provided to specific sections of the population (i.e. trade unions or peasant confederations) began to withdraw. As a result, protests, dissident groups and social mobilisations emerged throughout the region. The governments, who introduced neoliberal economic reforms, responded through violence and repression by using tactics of the authoritarian past to maintain social control and national security. Thirty years afterwards, the term ‘neoliberal authoritarianism’ has cropped up to describe the political state of affairs of two of the region’s economic powers – Brazil and Mexico: nepotism and impunity, collusion with transnational corporations and violation of human rights by state armed forces and police (in many cases these abuses are carried out in the name of security over the fight against drug-trafficking).  To this scenario, a new wave of fiscal austerity hitting the region since autumn 2015 has to be factored in. It is too early to tell the extent to which security tactics will fare, but it is indeed an arena that deserves attention. Its contrast with Europe is of equal interest given that governments have tended to enhance repressive and invasive strategies as austerity becomes normalised.

Finally, the third premise contends that the ‘development of security narratives need their austerity counterpart’. It derives from the academic work by Bourdieusian scholars who argue that neoliberal policies do not only repress, but also recreate repression through mundane, daily living practices carried out by both governmental and non-governmental actors. Applied to contexts in western Europe and the Americas, narratives of security are formed by a continuous investment (or co-investment with businesses) in penalisation (i.e. respect of the rule of law, development of penitentiary-probation systems and of armed forces and police), while traditional welfare policies retreat and new ones contribute to deepening flexibility and individual responsibility across the population, in particular addressing the poor. Through the promotion of different forms of work (in the formal or informal economy; as an employee or self-employed) citizens have to learn to provide for themselves (housing, education, leisure). This gradual self-provision requires security measures to ensure that social order is maintained. Security takes a multi-varied form that may range from omnipresent surveillance systems to the management of unintended effects of individualisation and privatisation, such as vigilante groups (which state actors either aim to supress or reintegrate into the system to regain social control).

Dr Valeria Guarneros-Meza is a core member of the CURA team as well as Lecturer in Public Policy at the Department of Politics and Public Policy at DMU.

Workshop on Austerity and Local Economic Development in England: Mapping a Research Agenda

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The Centre for Urban Research on Austerity (CURA) at De Montfort University (Leicester)  is holding a two day workshop on May 16th and 17th 2016 that will bring together leading academics to discuss the future research agenda around local economic development and skills in England.

One of the main pledges of the Coalition Government and its Conservative successor has been to ‘empower’ local communities to develop bespoke initiatives that can drive local economic growth, expand employment opportunities and help address sector and regional imbalances within the UK economy. As part of this ‘new localism’, Local Enterprise Partnerships (LEPs) have been established which bring together local authorities and business leaders to take forward this agenda. Government policy has also placed ‘cities’ and ‘city-regions’ at the core of its approach, brokering a number of ‘City-Deals’. These policy initiatives come at a time of austerity, with substantial cuts to public spending and local authority budgets.

From the outset, LEPs courted controversy, with many commentators highlighting problems of ‘inadequate resources’, ‘uncertain accountability’ and ‘varying capacity’. Since then resources have been stepped up and the dust has now settled sufficiently to permit a fuller assessment. One issue concerns how LEPs might link skills with economic development. For many years, government policy in England has emphasised skills as being central to economic competitiveness, productivity growth and social inclusion. Some commentators, however, argue that narrowly formulated policy interventions aimed at boosting skills supply often fail to address problems of weak employer demand for, and usage of, skills. Indeed, evidence indicates that the UK has serious problems with ‘over-qualification’ and the under-utilisation of skills, which often have a spatial dimension. Skills policies are likely to work better where they are joined up, and integrated within, a wider suite of policies around economic development, business improvement and innovation that impact on employer demand for skill.

If an integrated approach to skills is to emerge locally, then LEPs are a key mechanism. Much is likely to depend on their ability to engage local businesses and mobilise employer action around skills, an area that has proven to be challenging in the past, as well as build constructive partnerships with education and training providers. The hope might be that this approach would not only allow skills provision to be better tailored to local economic needs but would also be able to raise employer ambition around skills by effecting change in competitive strategies and approaches to work organisation, job design and people management. With all actors – LEPs, councils, employers, education and training providers and individuals – facing austerity, there are many challenges as well as questions. Will local actors be given the resources, freedoms and flexibility to deliver on this agenda? Will employers buy into this? Will policy commitments to ‘localism’ and ‘decentralisation’ be hamstrung by cultures of centralisation within Whitehall departments? Is power really being devolved or just responsibility for cuts? Will local actors find spaces for new, innovative and creative approaches that can be extended and built upon? How all of this will play out remains unclear. What is certain, however, is that there is an exciting and important research agenda here for workshop participants to engage with.

Speakers: David Bailey (Aston University), David Beale (Sheffield University), Gill Bentley (University of Birmingham), Crispian Fuller (Cardiff University), John Harrison, (Loughborough University), Martin Jones (Sheffield University), Ewart Keep (Oxford University), Andy Pike (Newcastle University), John Shutt (Leeds Beckett University), John Tomaney (University College London), Chris Warhurst (Warwick University)

If you are interested in attending please send an email to Suzanne Walker (swalker@dmu.ac.uk) to register your place.

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.

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’.

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

The Autumn Spending Review: A Political but not an Economic Fix?

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After the Government’s spending review on 25th November, I was struck by how experienced political commentators were fumbling to get a grip on the detail of its plans and forecasts. What lies beneath the headlines and soundbytes will become clear with time, but some general contours and contradictions are already emerging from the Chancellor’s “smoke and mirrors”.

The headlines will say that George Osborne reversed controversial proposals to cut tax credits – a U-turn for which shadow Chancellor John McDonnell quickly claimed credit for the Labour Party. But, they have not been reversed for people on the new Universal Credit system – a reform critics see as a serious benefits cut in itself. Moreover, tax credits will remain frozen and diminish in value. Osborne devolved some control over elements of local government finance, but with multiple strings attached. Council tax rises are permissible, but must be ring-fenced to adult care. Business rate rises are permissible, and local authorities will retain the returns. However, additional rate levies will depend on the consent of local business elites. Councils will have the same to spend in “cash terms” in 2020 as they do now. This announcement foreshadows major public service reductions, but on a scale impossible to anticipate without knowing other volatile variables in advance. The government, and councils, are investing hope in the integration of health and adult social care as a way of delivering austerity without outright retrenchment. Yet according to Lord Porter, Chair of the Local Government Association, a new round of cuts is likely to push councils to the edge of collapse. Osborne has spoken frequently of Britain moving from high welfare-high tax to a high wage-low welfare economy, predicated on increases to the minimum wage. Yet, an hourly living wage is only a real living wage for people working enough hours in the week to surpass income poverty thresholds. It will not be a living wage for those on part-time or zero hours contracts – or those in precarious self-employment.

Whatever the merits and drawbacks of specific cuts and measures, the holy grail of Osborne’s Chancellorship is delivering a budget surplus in 2020. The Office for Budget Responsibility suggested he will be boosted by an unexpected increase in tax receipts through the middle of this parliament, a claim immediately qualified by Chairman Robert Chote. Even if he enjoys good fortune with the tax receipt numbers, Osborne faces formidable barriers. Responding to the spending review, John McDonnell was quick to remind us of the Chancellor’s poor forecasting record. In 2010, the government said it would eliminate the budget deficit by 2015. Now, we are told this will occur in 2020. With the support of the Labour Party, the media and much of the public, the last government set a welfare-spending cap. Today, we were told the cap has been breached and will not be met until 2019. Ultimately, all depends on forecasts for sustained GDP growth at rates of 2.3 or 2.4% for each of the next five years. But such a stable pattern would be exceptional. In the best-case scenario, GDP growth will fluctuate in an upward direction. In the worst-case scenario, underlying weaknesses in the economic recovery will soon trigger another recession.

In short, it is plausible that before long, the government will have to revise its forecasts again and come back for more. If a budget surplus remains the primary goal of British economic policy, further attrition of the welfare state and corrosion of the public realm is the price we will be asked to pay. Even then, the goal could be elusive.

Jonathan Davies – Director, Centre for Urban Research on Austerity