2016 has been a jolt to the system. Everything feels new, precarious, uncertain.
But like a shovel to an overgrown backyard, the UK’s Referendum on EU membership has unearthed many unseen, or long-ignored, structural problems that have in fact been long, and deeply buried beneath the veneer of an economy on the rebound.
As Claudia Wood sets out, these include our sluggish productivity, our trade deficits, and our ever-mounting ledger of public debt.
In as much as some of the constituencies that voted to Leave did so as a rejection of the political and business establishment they felt increasingly estranged from, we cannot help but recognise the need for a more inclusive – and inclusive feeling – economy; not just an economy whose profits are better shared, but in which more citizens feel they have a stake, and to which they can actively contribute.
Work, after all, is not simply a matter of means, but of pride and fulfilment.
We cannot ignore the vast regional disparities in economic performance across the UK – and, as Josh Hardie points out, the differences in living standards and opportunities even within regions themselves. In the West Midlands, businesses in one town can be 30 per cent less productive than another only 20 miles away – with employees earning £5,000 less as a result. The Northern Powerhouse idea and its ensuing City Deals have kick-started a movement towards devolution – this ambition must be deepened, in a strategic and meaningful way that starts to deliver.
Rebuilding trust will also be critical. Revelations such as the Panama Papers scandal, and the public fall of figures such as Philip Green and Mike Ashley have only reinforced pernicious feelings that much of big business and our political elites are inherently corrupt, detached and self-serving.
As Steve Goodrich warns, the “hard realities of a more uncertain world” may increase the incentive to let “standards slip…in the name of jobs and growth”. But if there is one key opportunity in this ‘year zero’, it is to finally throw some weight and genuine action towards these issues.
A truly ambitious economic plan would also look ahead to the emerging suite of problems we know we will have to face head-on in due course – such as the ageing population, intergenerational unfairness, and the next phase of automation.
Despite the rise of transnational conglomerates, and declining state coffers, government action, and inaction, continues to be as instrumental to our living standards and economic equality as it has ever been. As Zsolt Darvas explains, redistribution, education and welfare policies in particular continue to shape the nature of a country’s ‘one per cent’, and the gap between them and the rest of the population.
The UK’s Chancellor of the Exchequer appears to appreciate the need to focus on shoring up the ‘nuts and bolts’ of Britain’s economy, with infrastructure investment forming the backbone of the Autumn Statement. Rob Halfon MP makes clear that improving skills levels will also be a critical priority for the Government, though he acknowledges the enormity of the task at hand in transforming the quality, quantity and public image of apprenticeships. It is a theme seconded by Hilary Steedman, who also emphasises the urgent need for reform in the standards of our technical and vocational education system.
It’s difficult to even begin to imagine what skills we will need to match current and future workers with the jobs and workplaces of tomorrow, when emerging careers fall outside of all our traditional definitions. As Chris Bryce writes, on the back of a stunning level of growth in self-employment in recent decades, the gig economy and its new decentralised model of ‘platforms’ has completely thrown out the rule book on taxation, employee rights and job security. Baron Skidelsky believes we should embrace this upheaval and implement a universal basic income, shifting our thoughts to what citizens could be contributing to, and benefiting from, outside of the labour market.
We can be certain that technology will continue to be a disruptive force – but, as Peter Fleming cautions, its impacts both now and into the future are not necessarily benign. While there has been much excitement about the opportunities of a new ‘workless’ utopia, unless paired with genuine social and economic reforms, we are rather likely to find ourselves working alongside technology in less favourable conditions. As Amanda McKenzie writes, we risk setting back recent achievements of responsible business if we cannot respond to the digital economy in a “responsible, principled, courageous and most importantly human” way.
These changes will affect us all, and without careful guidance there is a risk of ushering in another generation of winners and losers. Jill Rutter calls for the Government to be genuinely consultative about it plans to tackle these big challenges – with a national conversation ushering in a new era of consensus-based reform.
Pleasingly, the concept of ‘good business’ continues to gain ground in many major employers; the Government’s new Green Paper on Corporate Governance and Executive Pay offers an opportunity for businesses to demonstrate real leadership on this issue. Sean O’Hare helpfully summarises the green paper’s core tenets and explains how it might bring about demonstrative change. However, James Bloodworth reminds us that a more representative elite, remains an elite, and should not blind us to the long road still ahead to achieve a truly more equal and meritocratic society.
Keeping up is not good enough now, and certainly won’t be as we sail into the unchartered waters beyond 2019. As Sam Crosby’s piece on Australia’s social mobility “success story” deftly shows, a country’s long-sung advantages can quickly evaporate without constant attention and a thirst for improvement.
While we grapple to plug the leaks and dodge the oncoming freight trains of the future, Britain must also seek new, globally competitive pathways to economic growth. The phrase “the next industrial revolution” is bandied about too carelessly in these difficult days, but it is true that a similar sense of momentum, cohesion and ambition will be required to propel us forward.
A change of mindset is needed – and one of the clearest opportunities lies in helping older people to continue to be engaged in the workforce. As Baroness Altmann explains, there are benefits to both the young and the old, businesses of all sizes and the wider economy in creating more all-age-friendly workplaces with an emphasis on retraining and flexible hours.
We need to think more openly about how the public and private sector can work more closely and constructively together, recognising their symbiotic relationship and responsibility in Britain’s social and economic successes. As James Sproule writes, “business leaders that offer only criticisms of the state of Britain’s workforce, rather than involving themselves in the solution, are simply abrogating their duty”. But we must also extend this thinking to how the state and industry can better partner with the third sector – those organisations most directly connected with citizens. As Alberto Alemanno shows, there is huge scope for students, academics and workers to be lending their expertise to social causes.
Already accounting for the lion’s share of our output, cities will have to be at the centre of the next phase of Britain’s economic growth – but, as Kat Hanna reinforces, their internal geography is also important. Both local and national governments should consider the role that they can play in fostering ‘innovation districts’: highly productive clusters of knowledge-intensive businesses and high-skilled labour, which can, through agglomeration, punch well above their weight.
For Andrew White, there is also hope for strengthening both our economy and our soft power to be found in Britain’s creative industries – but only if the Government, businesses and trusts can reverse the trend of declining investment that has taken hold since the financial crisis.
Beyond this issue of Demos Quarterly, there may also be some clues in Joel Mokyr’s new book, A Culture of Growth: the Origins of the Modern Economy (Princeton, ISBN: 9780691168883), which examines the particular confluence of will and circumstances that gave rise to the Enlightenment era and the technological revolution that followed.
Mokyr argues that such astonishing intellectual and economic growth was the result of a specific type of interaction between culture and institutions; specifically, in encouraging a society that fostered the delicate mix of individualism and collectivism necessary for incentivising innovation, supporting agglomeration, and the socialisation of ideas and talent. 250 years ago, we had become a society that bred ‘cultural entrepreneurs’, and which was both curious and open to persuasion and change.
What is remarkable is how many of these characteristics have endured in Britain, so much so that they feel part of our national identity. And herein lies hope: none of this should be out of reach for us again.