Extractive capitalism: Britain has been a high-inequality, high-poverty nation for most of the last 200 years, with significant consequences for life chances, social resilience, and economic strength

Stewart Lansley writes that Britain’s model of ‘extractive capitalism’ – with a small elite securing an excessive slice of the economic cake – has created a two-century-long high-inequality, high-poverty cycle, one broken for only a brief period after the Second World War.

Over the last four decades, Britain has moved from being one of the most equal of rich nations to the second most unequal (after the United States). The same period has also seen a surge in levels of poverty, with the child poverty rate more than double that of the late 1970s (figure 1).

That these two key measures of social fragility have moved in line is no surprise. History cannot be clearer: poverty and inequality are critically linked. Poverty occurs when sections of society have insufficient resources to be able to afford a minimal acceptable contemporary living standard. Its scale is ultimately determined by how the ‘cake is cut’. Barring the short post-war period, Britain has been a high-inequality, high-poverty nation for most of the last 200 years, with significant consequences for life chances, social resilience, and economic strength. Because of the impact of inequality, the poorest fifth of Britons are today much poorer that their counterparts in other, more equal nations (chart 2). Germany’s poorest, for example, are a third better off than those in Britain.

Poverty and inequality levels are ultimately rooted in the outcome of the political and economic power games that play out between big business, state, and society. With the exception of the immediate post-war era, the struggles for share over the last 200 years have been won by the richest and most affluent sections of society, often with the compliance of the state.

For most of the nineteenth century, Britain was a near-plutocracy, with society run mostly by and for the richest sections of society. Colossal and heavily concentrated wealth sat beside crushing poverty through a form of collective monopoly power exercised by a small landowning, industrial and financial elite. The governing and wealthy classes created a form of ‘extractive capitalism’ aimed at securing a disproportionate share of the economic gains from industrialism, often by steering economic resources into unproductive use, with no or limited addition to economic value. ‘The efforts of men are utilized in two different ways’ declared the influential Italian economist Vilfredo Pareto in 1896. ‘They are directed to the production or transformation of economic goods, or else to the appropriation of goods produced by others’.

The long high poverty/inequality cycle and the strength of extraction are inter-connected. The cycle has only been broken once, when from 1945 the bitter ideological battle of ideas was finally won by pro-equality thinkers. The achievement of peak economic equality and an historic low for poverty in the 1970s was a seminal moment in British history. Yet it was short-lived, with the ideological baton passing to a group of New Right evangelists who proclaimed, falsely as it turned out, that a stiff dose of inequality would drive economic progress. As Sir Keith Joseph, a key adviser to Margaret Thatcher, put it in 1976: ‘the pursuit of income equality will turn this country into a totalitarian slum.’ From that point, egalitarianism was replaced by an entrenched bias to inequality. But instead of creating the promised economic and entrepreneurial renaissance, the new licence to get super rich simply triggered a second era of extraction and of Pareto’s ‘appropriation’ and a second wave of high poverty and inequality that is still in place.

Few other nations have applied a pro-inequality economic strategy as comprehensively as Britain and the United States. With the world’s top one per cent emitting twice the carbon emissions of the poorest half, the return of extraction also lies at the heart of the global climate crisis. Corporate leaders have exploited their growing muscle using business practices that have played havoc with pay, jobs, and livelihoods. As the American megabank Citigroup wrote in a confidential note to its clients a few years ago, the United States has long been aplutonomy, one that allows ‘the economic disenfranchisement of the masses for the benefit of the few’.

Examples of complex and carefully hidden extractive devices have included the application of monopoly power through the ruthless destruction of rivals and the rigging of financial markets, to the ‘skimming’ of trading profits – a process City traders like to call ‘the croupier’s take’ – and the engineering of company accounts. The boom in the private takeover of public companies since the millennium, from the AA to Boots and Morrisons, has enriched a generation of private equity barons, often at the expense of the survival of the targeted companies themselves. The long list of companies destroyed by such financial manipulation include ICI, GEC, BHS and Debenhams. Under extraction, economic activity becomes detached from new wealth creation, with the boost to profitability and rising corporate surpluses of recent times used to reward executives and investors rather than boost productivity. In 2019, global stock markets paid out record dividends of $1.37 trillion.

What has been at work is a form of levelling up at the top by levelling down at the bottom.  While egalitarians have yet to regain the ideological high ground, one of the big questions of political economy of the next few years must be the extent to which an entrenched anti- egalitarian model of capitalism can be reformed?

__________________

Note: the above draws on the author’s new book, The Richer, the Poorer, How Britain Enriched the Few and Failed the Poor, a 200-year history ( Bristol University Press, 2021).

About the Author

Stewart Lansley is a visiting fellow at the University of Bristol, a Council member of the Progressive Economy Forum and the author of Breadline Britain, The Rise of Mass Poverty (with Joanna Mack, 2015) and The Cost of Inequality (2011).

LSE Blogs

‘Levelling-up’: the government’s plans aren’t enough to promote economic growth and tackle inequality

The government’s levelling-up plan dodges the hard choices says Henry OvermanCountering the economic forces behind the UK’s spatial disparities requires addressing multiple barriers and allowing differing approaches – and the funds committed so far don’t appear to be proportionate to the scale of the challenge.

The government’s Levelling-Up White Paper focuses on 12 missions that aim to level-up the UK. Lots will be said about whether the government is spending enough (almost certainly not), whether devolving more powers is a good thing (almost certainly), and how much of their plan is different to past efforts (not much, for those of us that remember the 1990s and 2000s).

Setting these issues aside, does the economic strategy make sense? If government spent enough, and gave places the right powers, would pay, employment and productivity gaps narrow? The answer will depend on how government resolves the fundamental tension between the role of ‘globally competitive cities’ (part of mission 1) and other local economies spread across the country. For the economic strategy to work, the evidence suggests that spatially concentrated investment is crucial, but politics and a concern for quality of life make the case for equalising spending.

Many things determine spatial disparities in Britain. The legacy of 1970s deindustrialisation, the ongoing shift from manufacturing to services, and falling communication and transportation costs all play a part in changing the geography of jobs and the demand for different types of workers. Spatial differences in educational attainment, the selective migration of skilled workers and differences in amenities and costs of living help determine the supply of different types of workers. Demand for and supply of skills interact in a way that can be self-reinforcing, meaning large spatial differences can emerge and persist. Levelling-up policy must counter these economic forces if it is to succeed.

One important consequence of these economic forces is that spatial disparities in earnings – which the government wants to narrow – largely reflect the concentration of high-skilled workers. The share of adults with degrees ranges from 15 per cent in Doncaster to 54 per cent in Brighton. High-skilled workers tend to work in better performing labour markets, which further magnifies individual labour market advantages. At least 60 per cent and up to 90 per cent of differences in average wages across areas can be attributed to differences in the types of people who work in different places.

This has important consequences for ‘levelling up’. A pragmatic aim for the economic strategy might be to improve economic performance in some areas outside of London and the South-East – reducing spatial disparities at the regional level, if not necessarily across more narrowly defined local areas. This would allow talented young people in left-behind places to access better paid opportunities without having to move across the country.

To generate these opportunities and counter the self-reinforcing feedback loops – which mean the highest paid jobs are concentrated in London and a handful of other areas – large investments will be needed in a limited number of cities to attract high-skilled workers and the firms that employ them. The mention of globally competitive cities (as part of mission 1) suggests that the government understands this key point.

Why focus on the high-skilled? Because the evidence – much of which is discussed in a report on spatial inequalities by myself and Xiaowei Xu, written for the IFS Deaton Review – suggests that the impact of targeted R&D investment(mission 2), infrastructure (missions 3 and 4), public sector relocation and other place-based policies will be small unless they significantly alter the composition of the workforce in an area. Even a project of the size of HS2, for example, will do little for the economy of the West Midlands unless it somehow improves local educational outcomes for children growing up there or encourages a much larger share of graduates and the firms that employ them to locate there.

And why cities, not towns? Such investments could improve earnings in any area. However, there are many small towns, investment in infrastructure and innovation is costly, and there are only so many public sector jobs to relocate. Focusing on towns, especially with limited funds, does not scale up to produce large effects across lots of areas.

Looking to cities recognises that the advantages of high-skilled areas are self-reinforcing. The concentration of high-skilled firms and workers generates productivity advantages for firms and better labour market outcomes for workers. In turn, this attracts high-skilled workers from across the country. In short, London’s economic advantages stem from the concentration of skilled firms and workers, and from its economic size, and these factors are self-reinforcing. London’s economic strength also spills over to benefit towns and cities across the wider South-East.

To provide a counterbalance to London and the South-East, investment needs to kick-start these self-reinforcing processes elsewhere. The fact that size is one key part of this self-reinforcing cycle explains why that investment needs focusing on cities.

Unfortunately, we need to recognise that these policies are likely to benefit high-skilled workers more than low-skilled workers. For talented children growing up in struggling towns, increased opportunities nearby offer the option of commuting or a small-distance move, making it easier to maintain links with family and friends. Moreover, some of these benefits will trickle down to the lower-paid in the form of moderately higher wages and improved employment rates, but at the cost of expensive housing.

Sadly, while all these trickle-down benefits are possible, London – with its many poor neighbourhoods, expensive housing and high poverty rates – points to the limits of this approach for improving outcomes for those at the bottom of the income distribution. A more equal spread of graduates – and globally competitive cities in each region – may help reduce spatial disparities and may even help improve the overall performance of the economy, but it is no simple fix for improving outcomes for poorer households. To do this, complementary investments must make sure that households can access the opportunities generated.

The current debate often interprets this as being about ‘better transport’. For many poorer households, however, transport investment generally will not be enough. Again, examples from London illustrate the issues – Barking and Dagenham (areas in the east of London) have good transport links to one of the largest concentrations of employment in the world, but this is not enough to prevent low earnings for many households who live there. If poorer households are to benefit from the kind of investments described above, then they will need help to improve their education and skills.

For some households, the multiple barriers that prevent individuals from being able to access better economic opportunities go beyond education and skills. Many of the ‘left-behind’ places that levelling-up wants to target have high proportions of vulnerable people with complex needs and low levels of economic activity. This compounds their problems, as long-term unemployment, poverty, mental illness and poor health often go hand-in-hand.

Addressing these multiple barriers will involve significant investment not only in education and skills, but also in childcare, and in mental and physical health services. Research suggests that small tinkering and minor tweaks of existing policies will not be enough to tackle the multiple barriers faced in these places. The White Paper recognises these issues with its focus on education (missions 5 and 6) and health (mission 7), but the funds committed so far do not appear to be proportionate to the scale of the challenge.

I have focused on the economics of levelling up but it is important to be clear that spending on levelling-up does not always need to be justified based on economic growth. There are important public good arguments that can justify increased expenditure across a wide range of policy areas. And unlike the economic strategy, there is a strong case that these funds should be equally distributed. For example, it is possible to argue for subsidising rural broadband (part of mission 4) as a public good, while recognising that its economic impacts are likely to be limited. In addition, although such policies, including those around wellbeing (mission 8), pride in place (mission 9) and crime (mission 11) do not specifically target the bottom of the income distribution, they will often benefit poorer households most.

Places matter to people. For many people, the place where they grow up will become the place where they live and work. Disparities in economic opportunities, in costs of living and in amenities provide the context for, and directly influence, the decisions they take and the life they will live.

Improving economic performance and helping to tackle the problems of left-behind places are both important policy objectives. Addressing these challenges requires a new approach to policy, one that allows for different responses in different places. Such variation makes many people nervous. Constituency based politics mean that political messages tend to prefer spending everywhere. However, policy must allow for this variation. Devolved power (mission 12) will help but central government will still need to grapple with the fundamental trade-off between concentrating spending to help achieve the economic strategy while spreading out spending to meet the other objectives.

I would argue that this becomes easier if we remember that we should care more about the effect of policies on people than on places. If this is the case, we should judge the success of levelling-up on the extent to which it improves individual opportunities and on who benefits, rather than on whether it simply narrows the gap between places.

 

___________________

About the Author

Henry Overman is Professor of Economic Geography in the Department of Geography and Environment at the London School of Economics and Director of the What Works Centre for Local Economic Growth. He is Research Director of the Centre for Economic Performance.

https://blogs.lse.ac.uk/politicsandpolicy/levelling-up-the-governments-plans-arent-enough-to-promote-economic-growth-and-tackle-inequality/?utm_source=feedburner&utm_medium=email

Official statistics underestimate wealth inequality in Britain

The latest statistics from the ONS are a welcome but limited insight into what has been happening to wealth in Britain, write Arun Advani andHannah Tarrant. Limitations in survey response mean they will underestimate the share of wealth at the top. But while they will not tell us what has happened as a result of the pandemic, we can use them to provide an educated guess.

The ONS’s latest figures on what has been happening to wealth in Great Britain, released in January 2022, are already out of date, covering only the period up to March 2020, and therefore missing the effects of the pandemic. But they are also limited in another way: they underestimate the share of wealth going to the richest households. Given the debates about inequality, discussion about wealth taxes to pay for COVID-19, and the growing importance of inherited wealth as a share of lifetime resources, it is important to get this right.

Total wealth is underestimated

Looking back at the past 12 years of the ONS survey, the figures show that total wealth in Great Britain has risen from £10.4tn to £14.6tn (in 2016–18 prices), meaning average household wealth has risen from £402,100 to £564,300. Over the same period, the share of all wealth held by the wealthiest 10% of households has risen very slightly, from 44% to 45%. However, there are two problems with these figures. First, they do not include business wealth, which is an important source of wealth for the wealthiest households. Second, they substantially under-record the total wealth held by wealthy households, since, unsurprisingly, the very wealthy do not tend to respond to such surveys.

Adjusting the data to account for business wealth – which is measured in the survey but excluded from official statistics – we find that total wealth in Great Britain is £0.7tn higher in 2016–18. This is about 5% of the current estimate, and the proportional underestimation has been similar back to 2010–12. After adding in wealth observed in the Sunday Times Rich List, and using a statistical approach to correct for the under-representation of other wealthy households, total wealth is higher still, by £0.5tn in 2016–18. Total GB wealth is therefore underestimated in the ONS figures by about 8%.

Top wealth is higher than officially reported

After making these adjustments, the level of inequality is also higher (Figure 1). Adding business wealth into the calculation, the share of wealth owned by the wealthiest 10% of households actually rises significantly, by two percentage points. Consistent with the ONS figures, this has remained broadly steady over the period. Correcting for missing wealth at the top, we find the share of wealth going to the top 10% is further increased slightly, to around 47%, and still flat.

Notes: Constructed using data from the Wealth and Assets Survey (WAS) and the Sunday Times Rich List (STRL). ‘Including business’ adds business wealth to the ONS measure of wealth used in official statistics. ‘Also correcting top wealth’ additionally includes the wealth from the STRL and a ‘Pareto correction’ for under-reported wealth among the wealthiest households. See Advani Bangham and Leslie (2021) and Advani Hughson and Tarrant (2021)for details of the correction method. Top shares are measured at household level, consistent with the ONS.

Political movements after the financial crisis, and the work of economists like Thomas Piketty, have favoured looking at wealth concentration among smaller groups – specifically the top 1% wealthiest households. The ONS does not provide figures for this group. Constructing this measure ourselves, we see the importance both of including business wealth and of correcting for under-coverage at the top. Together, these adjustments add around 55% (6 percentage points) to the share of wealth owned by the top 1% in 2016–18 (Figure 2).

Notes: same as for Figure 1.

Other inequalities in wealth

There are also important demographic differences in wealth holdings that are worth highlighting. Men typically have higher levels of wealth: they hold almost 40% more wealth than women, on average. Wealth is concentrated among older individuals. This is partly because individuals close to retirement have had their whole working life to save, but they also benefited ‘from both benign economic developments (such as rapid rises in the value of their homes, generous occupational pension provision and decades of healthy wage growth) and generous government policies (such as free university tuition, big tax breaks for pension saving and capital gains on main homes, and the ‘triple lock’ on the state pension)’.

Wealth differences between households from different ethnic groups are stark: households whose ‘Household Reference Person’ (HRP, the main respondent to the survey) is of white ethnicity are four times more likely to have wealth in excess of £500,000 than households with a black African HRP. There are important differences in household wealth portfolios too: Pakistani and Indian households are less likely to hold pension wealth, with home ownership being more important in their asset holdings.

Previous analysis by the ONShighlights significant regional variation in household wealth. Median wealth is more than 2.5 times higher in the South East compared to the North East. This variation can largely be explained by differences in house prices, with changing house prices contributing to a growing divergence in wealth levels across regions.

Wealth trends since the pandemic

Although these latest figures will not provide direct information on what has happened to wealth since the start of the pandemic, a look at the historic survey data does provide some insight. Dividing the population up into deciles, there are clear differences in asset holdings across the distribution. We know that the average house price rose by 16% between the start of the pandemic and October 2021, and these gains were middle-weighted (Figure 3). Falling interest rates also increase the value of pensions, which are similarly middle-weighted. Meanwhile, stock market growth of around a third since the pandemic lows has disproportionately benefited richer households, though the impact of the pandemic on private businesses is less easy to measure. COVID-19 has also led to those at the bottom of the distribution, who experienced the biggest hit to their savings, falling further behind the rest.

Notes: The lowest decile is excluded as net wealth is negative. Source: Advani, Bangham and Leslie (2021).

What does this mean for the effects of the pandemic on wealth inequality? Overall, the wealthiest have clearly gained most in cash terms over the pandemic. But apart from among the super-wealthy – where there has been very rapid wealth growth – the effect on wealth concentration is likely to be less visible because there are large gains relative to initial wealth for those in the middle as well as those at the top.

____________________

About the Authors

Arun Advani is Assistant Professor in the Department of Economics at the University of Warwick.

Hannah Tarrant is Research Officer in the International Inequalities Institute at LSE.

https://blogs.lse.ac.uk/politicsandpolicy/official-statistics-underestimate-wealth-inequality/?utm_source=feedburner&utm_medium=email

The teenager’s poem that reveals the cruel reality of life in modern Britain

https://poems.poetrysociety.org.uk/poems/welcome-to-tottenham/

Aditya Chakrabortty
To policymakers, poet Giovanni Rose would be just a statistic. But like everyone ignored by politicians, he is so much more

What if a statistic could speak its own truth? What if a stereotype could confound your expectations?

A few weeks back, I was riffling through the local papers when a story jumped out. A schoolboy in Tottenham, north London, had just won an award as a Foyle Young Poet of the Year. At the bottom was printed his poem. Called Welcome to Tottenham, it brought the news from a society that is only a few miles from Westminster but might as well be a whole world away.

When historians such as EP Thompson and Eric Hobsbawm took ordinary people’s lives and perspectives as their subjects, rather than stories of kings and generals, their work was labelled history from below. So let’s call this poem news from below, the headlines as if Liz Truss didn’t matter (imagine) and blue-on-blue combat was a soap playing on a far-off screen. The news, in other words, for the country in which most of us actually live.

Welcome to Tottenham.

Where we wake up to the smell of ‘Chick king’,

Mixed with the odour of the corpse from the night before.

Where we cover our blood stained streets with dried up gum,

Where kids have holes in their last pairs of shoes,

Where daddy left mummy and mummy’s left poor.

Youtube

Giovanni Rose: Welcome to Tottenham.

Giovanni Rose wrote his poem in a few hours on a Covid-era Chromebook handed out by his school. The teenager didn’t need to make stuff up; he jotted down the world he’d been born into. In person, he’s neither swot nor class clown, just a kid who keeps his head down and never swears in front of grownups and talks softly in the same rubbery twang as most working-class youngsters in London today. And with the same unblinking clarity that marks his verse, he knows how strangers see him.

A 17-year-old black boy, he has been stopped and searched by the police on his local high road and off Oxford Street, even once by armed officers when he was, irony of ironies, making a short film against knife crime. To policymakers, he’s a statistic; to ministers he’s a stereotype; and to the media, people like Giovanni are … what, exactly? Case studies, perhaps, to be allotted their 10-second clip on the evening news and then chucked away.

But a democracy that can’t or won’t listen to outsiders such as him is not only missing out: it’s falling down on the job. A political class that hand-waves about “the youth” would be best advised to shut up and listen to them. And the thing about Giovanni, and all the others who get talked over in our politics, is that they don’t fit their cutouts. They are so much bigger.

Giovanni knows wearing joggers and a hoodie gets him marked down as a thug – except they’re comfy, so he puts them on anyway. He grew up in one of the most deprived parts of England but he won’t let that define him either. His GCSEs were a string of 8s and 9s, and if his A-levels come in as predicted he should be off next September to study maths at a top university.

Let me admit also to a personal interest. To go from Giovanni’s childhood, in the shadow of the Northumberland Park estate, and mine, right by Edmonton Green, takes a mere 10 minutes by bus but nearly three decades of history. I grew up under Thatcher; he’s got Johnson. He is black; I am brown. Our paths cross and abut each other. His landscape is mine, almost, but as foreign as time renders everything. And so, after meeting and speaking a few times, he agreed to show me how my old world looks to a teenage boy today.

Where we ride around on stolen scooters,

Where we can’t afford tuition so the streets are our tutors.Advertisement

His childhood home is in a street with a church-cum-foodbank but backs on to a drug house: a small terrace cottage out of which industrial quantities of drugs were sold. Every time police raided, the dealers would jump the fence into his backyard. Too young to know what was going on, Giovanni would panic that burglars were breaking in.

“The last straw for my mum was when a dealer got Tasered by the police in my garden,” he recalls. “It’s kind of funny now. But at the same time, it’s not normal.”

His secondary school has to help hundreds of kids growing up in abnormal circumstances prepare for a world that expects them to behave perfectly normally. “They come in with trauma, having faced violence or sexual abuse,” says Jan Balon, head of the London Academy of Excellence Tottenham. He has recruited what is essentially a mental health unit, which counsels just under 10% of the student body throughout the week. It costs, Balon admits, “a stupid amount of money” but the NHS services are too underfunded and overwhelmed to rely on.

I love but I hate my home,

I still listen to the voicemails of my dead peers in my phone

One night when he was 14, Giovanni was woken by the sound of gunshots. Out of his bedroom window, he could see the aftermath of a drive-by. Seventeen-year-old Tanesha Melbourne-Blake had been killed in a hail of bullets. For years afterwards, the road was decorated with memorials to her.

He was only 15 when a close friend went with a younger mate to try to retrieve a stolen £90 pair of trainers. The friend never came home. A 21-year-old man stabbed him 10 times. Not long before, he’d left Giovanni a voice note on Snapchat. “Just random, like ‘How are you, bro?’” Giovanni used to listen to it afterwards. “Because I missed him.”

Giovanni came into a world where adults of all kinds could not be automatically trusted: not the local gangsters, nor the police. Nor others who purported to be in authority. He was born as the war in Iraq went from false triumph into naked disaster. He started at primary as the financial crisisturned into a global depression. The year after, austerity began. He was seven when Tottenham erupted over the police killing of Mark Duggan and his family home was a mile away from ground zero of the riots that would consume London and then England. And over the past couple of years, he’s been out of school for nearly six months, his wifi breaking amid remote lessons and pleading with his eight-year-old twin siblings not to disturb him during class. But with his own bedroom, he counts among his peers as lucky.

We fight over streets we don’t own

Knife crime’s on the rise because the beef can’t be left alone.

Giovanni’s mum drilled him well, both in studies and on the streets: stick to the main roads, keep looking over your shoulder. He never just goes for a walk without a destination, always knows who’ll be there and when he should be back (roughly: he’s a teenager, after all). He lives in what Yvonne Kelly, a professor of lifecourse epidemiology at UCL, calls “a state of hyper-vigilance”.

“Just constantly worrying who’s about to come up behind him means a high level of cortisol will be swilling around his system,” she says. “If that’s repeated day after day after day, it could make him physically ill.” And so psychological threat can turn into bodily damage.

In a couple of weeks, Giovanni will sit his mock exams, having already faced tests that most of us will never know. And then … well, then he wants to get out of Tottenham, leave all this behind. His hero is the rapper Stormzy, “a rich black man who got out of the hood”. That’s his dream, and now it’s within reach.

“A bit of me feels: ‘I made it out!’ I’m relieved I survived, but I miss this space. Most of my friends are here, most of my memories are here. Even the smell of the chicken shop.”

While he’s revising for his A-levels, ask yourself two questions: how Great can Britain be, if a boy counts himself lucky just to survive here? And what is the value of a childhood home if you’re constantly taught you must leave it behind?

  • Aditya Chakrabortty is a Guardian columnist and senior economics commentator
  • Excerpts from Welcome to Tottenham quoted by kind permission of Giovanni Rose

Guardian UK

The gradual corporatization of the English NHS has created conditions which have precipitated an increasingly commercialized and entrepreneurial healthcare system

Posted: 10 Dec 2021 12:00 AM PST

Recent healthcare reforms in England, combined with financial austerity, have accelerated both the corporatization and commercialization of the NHS. This combination has encouraged greater public sector entrepreneurialism, argue Damian E. HodgsonSimon BaileyMark ExworthyMike BresnenJohn Hassard, and Paula Hyde. They examine the meaning and experience of corporatization in the sector, illustrating their argument with qualitative data from a specialist hospital. 

The passage of the Health and Care Bill through Parliament has revived debates about privatisation and the NHS. However, much less attention has been devoted to the closely related process of commercialism in the NHS, as an illustration of entrepreneurialism across public services more generally. Here, we trace the origins of the growing commercialism in the NHS in England and draw attention to some of the hidden costs of entrepreneurialism in the public sector.

Commercialism in the English NHS, although encouraged implicitly since the formation of Foundation Trusts in the early 2000s, was promoted by the Health and Social Care Act of 2012. The Act not only enshrined competitive and commercial behaviour in law, but it also abolished caps on commercial income of NHS Foundation Trusts, so that trusts could in principle generate up to 49% of their income from commercial sources. This of course has coincided with a decade of austerity, with rising activity in hospitals not matched by reimbursement from the public purse. This financial pressure has served as a sharp incentive to trusts to seek out new opportunities to maximise both ‘core’ and ‘non-core’ income.  By 2016, non-core income accounted for 9.1% of Trusts’ income, varying between 1.6% for ambulance trusts to 21.4% for community health trusts.

In practice, income generation has taken many forms. In the English NHS, such ‘non-core’ activity ranges from maximizing revenue from ancillary services such as laundry or car-parking, which generated around £290m in England in 2019-20, through to commercial land sales. What might be considered ‘core’ activity ranges from generating revenue by hosting both commercial and non-commercial research, maximising income from private and fee-paying patients, and public-private joint venture activity, such as University Hospitals Birmingham building a £65m hospital in a joint venture with the private HCS Healthcare UK, or the Royal Marsden hospital opening a cancer treatment centre near Harley Street to directly compete with the private sector.

The effects of some of these initiatives has not gone unnoticed, with rising public irritation at the escalating cost of hospital car parking, for example, and the occasional public furore when an over-ambitious private venture by a hospital, such as a music festival, goes wrong. The financial pressures driving this activity are sometimes visible, with revelations that half of the income generated through one-off commercial land sales went to fill holes in day-to-day budgets of NHS trusts.

These commercial initiatives in the NHS, of course, depend on new behaviours among staff; to be alert to market opportunities, and to be willing and able to take financial risks in order to effectively exploit new sources of income – which has been described as a kind of public sector entrepreneurialism. How far this can or should be reconciled with traditional public sector values and ethos is a key question; does this imply an erosion of public sector values, or a modernisation and reinvention of public service built around innovation and enterprise?

To find out what this increased public sector entrepreneurialism means for the people who work in the NHS, we looked at experiences in one English specialist hospital in the vanguard of commercialisation through the last decade. This hospital was distinctive in that it had a recognisable and prestigious ‘brand’ and a strong reputation for quality of care, nurtured by a large communications department. It was also relatively insulated from the effects of austerity through the 2010s, being much more financially stable than many other NHS trusts with a substantial charity arm. It was also more engaged with entrepreneurial activities, such as joint ventures with private companies, than most NHS hospitals.

We spoke to doctors, nurses, and managers across the hospital about their experiences in the Trust and found that most were very aware of the distinctive mindset at the Trust, which they described as ‘progressive’, ‘business-focused’, and entrepreneurial. While some spoke positively of this, all recognised the distinction between this way of working and the traditional NHS way, and the challenges this posed to many staff. A key challenge related to the blurred lines between ‘commercial’ and ‘non-commercial’ activity, or between the public and private sector activities which take place on the hospital site.

One way in which this boundary is managed by many is by compartmentalisation, with some revenue-generating units seeing themselves as a ‘private enterprise within an NHS organisation’, and thus needing to operate in a different way. Similarly, the strategic and professional way in which the charity and marketing departments worked, to build and maintain a strong brand reputation, were seen as reflecting a different kind of ‘drive’ to the rest of the Trust. Nonetheless, to some degree the charity played a key role in legitimising the principle of commercial engagement and a kind of innovative entrepreneurialism; if the charity could generate valuable revenue, why not other ventures building on the brand identity built up by the Trust? In this way marketing and branding supported other kinds of income generation activities by the hospital including outreach and joint venture activity.

For many, this commercial activity raised ethical concerns which could not be assuaged by compartmentalising this activity. For some, the justification was that commercial success could be used to cross-subsidise core activities, although the degree of public benefit was viewed sceptically by some. Others, committed to the principle of ‘providing care free at the point of delivery’, found any payment for treatment unethical. On a personal level, some staff described their own discomfort with pressures to generate income. However, even staff with objections in principle felt that they needed to engage with the private sector ventures to protect their future career, having seen the direction of travel across the sector.

So to what degree could we see evidence of the kind of mission drift and goal displacement associated with commercialisation in other public sectors? In one sense, this was minimised by work to decouple and compartmentalise commercial and entrepreneurial activities, focusing their activities in certain units such as research, joint ventures, and the charity. However, they similarly served to justify the principle of revenue generation. Arguments that this indirectly benefitted and supported the core mission meant that ethical dilemmas were more widely experienced across the trust. Normalisation also meant that many felt unable to separate themselves from this activity, as who knew when their future employment might depend on their exposure and comfort with commercial work?

Our research does not suggest that public sector entrepreneurialism is normal or indeed widespread in the English NHS. However, there are ongoing pressures to exploit ‘increased opportunities for income generation from the commercialization of certain “noncore” NHS functions’, in the words of NHS Improvement in 2018 – and little prospect of the kind of funding settlement that would release pressure to seek alternative forms of income. In addition to fiscal questions of risk/reward, and ethical questions over certain forms of revenue generation, we seek to draw attention to the more insidious implications of the normalisation of commercialism and public sector entrepreneurialism in the NHS. As the conduct of staff shifts incrementally towards different ways of thinking and practising then there is a distinct risk that mission drift, goal displacement, and more acute ethical dilemmas will become more likely.____________________

About the Authors
Damian E. Hodgson is Professor of Organisation Studies in the Management School at the University of Sheffield.
Simon Bailey is Researcher at the Centre for Health Services Studies at the University of Kent.
Mark Exworthy is Professor of Health Policy and Management in the Health Services Management Centre at the University of Birmingham.
Mike Bresnen is Professor of Organisation Studies and Head of Department of People and Performance at Manchester Metropolitan University Business School.
John Hassard is Professor of Organisational Analysis at the University of Manchester.
Paula Hyde is Professor of Organisation Studies at the University of Birmingham.
https://blogs.lse.ac.uk/politicsandpolicy/corporatization-commercialization-nhs/?utm_source=feedburner&utm_medium=email

A progressive new government takes shape in Germany. Olaf Scholz’s three-party talks conclude with a promising coalition deal.

By Jeremy Cliffe

https://www.newstatesman.com/world/europe/2021/11/a-progressive-new-government-takes-shape-in-germany

Outgoing German Chancellor Angela Merkel receives a bouquet of flowers from the man who will succeed her in office, Olaf Scholz. Photo by MARKUS SCHREIBER/POOL/AFP via Getty Images

A pragmatic, unflashy former mayor of Hamburg, Olaf Scholz is not usually one for gestures. Yet there were bursts of symbolism in the announcement this afternoon (24 November) of a successful three-party coalition deal between his Social Democrats (SPD), the Greens and the conservative-liberal Free Democrats (FDP) that confirms that he will succeed Angela Merkel as Germany’s chancellor, most probably in the week of 6 December.

The event took place in a converted warehouse at the Westhafen, a port area on Berlin’s industrial canal network still marked by cranes and train tracks, and now home to a trendy emerging art scene. The new government, went the message, is all about the future. It is known as the “traffic-light” coalition as the colours of the three parties are red, green and yellow. Scholz picked up on that, too, noting that a pioneering new traffic light was installed in 1924 in Berlin’s Potsdamer Platz; a symbol of both innovation and reliability. Then there was the title of the coalition deal itself, “dare more progress”, an obvious nod to the slogan “dare more democracy” under which the SPD federal chancellor Willy Brandt ushered in a period of modernisation from 1969.

To be sure, it was a sober occasion. Scholz and the other speakers began their remarks by noting the alarming rise in Covid-19 cases in Germany and indicating the priority the new government would accord the battle to bring down numbers.

Yet there was still a feeling of possibility about the announcements, a sense that something new is coming to Germany. Monday (22 November) was the 16th anniversary of Merkel assuming the chancellorship. As I argued in my recent New Statesman cover feature, her time in power has provided stability and maturity, but has also been too reactive and too slow to embrace change. Plenty of younger voters do not remember a time before her. Now she is going and a new government is on its way, combining three parties that have never governed all together at federal level. The joint programme they have formulated contains many steps that will move the country forward.

Major commitments draw on the key manifesto pledges of all three parties. The SPD gets a €12 minimum wage, pensions stable at a minimum of 48 per cent of average wages and 400,000 new homes built a year. For the Greens, the end to coal power is brought forward from the current goal of 2038 to “ideally” (a qualification at which some in the party bridle) 2030, as well as the promise of 80 per cent of energy from renewables by 2030. The FDP gets the introduction of equity pensions, new tax incentives for businesses and a maintenance of the “debt brake”, which heavily limits deficit spending.

Perhaps the biggest topic of disagreement – between the SPD and Green emphasis on increased investment and the FDP’s fiscal hawkishness – is bridged through a combination of open-ended language and canny fiddles (removing certain green investments from the debt brake restrictions, for example, and expanding the use of off-balance-sheet investment bodies to finance public capital spending). That should allow a modest loosening of Germany’s budget strings when it comes to investment in decarbonisation, digital infrastructure and other such suitably future-wards causes. On fiscal policy in the wider euro zone, the coalition deal is relatively unspecific but agrees that doctrinaire rules such as those of the Stability and Growth Pact can be “developed further”. That a deal signed off by the flinty FDP includes such open-ended language puts it on the more positive end of the spectrum of realistic possibilities.

Another area of potential disagreement is foreign policy. The Greens are firm on human rights and democracy but also have pacifist traditions. The SPD has been known to put exports above values in its attitudes to autocracies such as Russia and China. The FDP mainstream is keenly Atlanticist. Yet here, too, compromises were found – helped, no doubt, by Scholz and the Green co-leaders Annalena Baerbock and Robert Habeck being on the Atlanticist wings of their respective parties. The coalition deal supports Taiwan’s participation in international organisations – the first time that Taiwan has even been mentioned in a German coalition deal – and uses tough language on Russia, demanding an “immediate end” to its interference in Ukraine. Under the deal Germany seeks observer status to the Treaty on the Prohibition of Nuclear Weapons (which bothers some Nato allies), but it reaffirms German participation in nuclear sharing (which reassures them). All together it amounts to a mixed picture for allies but with more positives than negatives both for European partners such as France and for alliance partners such as the US.

Where fiscal and foreign policy involved compromises, liberalising social policies are an area of broad common ground between the three traffic-light parties. And it shows – it is there that the coalition deal is boldest and most transformative. For example, the incoming government intends to legalise cannabis, lower the voting age to 16, allow doctors to provide information about their abortion services (where now they cannot) and facilitate self-identification for trans people.

Most striking is the change to citizenship rules. Until the late 1990s, German-ness was still overwhelmingly treated as a matter of inheritance – of whether one had German ancestry or not. That has changed, but gradually. Now the traffic-light parties propose to make dual citizenship widely available, to increase integration programmes and to reduce greatly the time from arrival to naturalisation – in cases of particularly well-integrated migrants, to just three years. Germany’s rapid transformation from a country defined by an ethnic identity to one defined by constitutional identity (that is, one that can be acquired by adherence to values and institutions rather than family background) is remarkable and profoundly welcome. It also reflects Scholz’s own policies as mayor in Hamburg, where, as I wrote in my recent profile, he successfully combined openness to migration with a heavy emphasis on rapid integration and naturalisation.

Though ministerial roles are not formally part of the coalition deal, we also learned today which parties have obtained which seats in the incoming federal cabinet. Alongside the chancellery, Scholz’s SPD secures the ministries of the interior, defence, health, labour, international development and housing. The Greens get a mighty economy-climate ministry (under Habeck), the foreign ministry (under Baerbock), as well as the environment, family and agriculture ministries. The FDP secures the crucial finance ministry (which will go to Christian Lindner, the party’s leader) as well as the transport, education and justice ministries. How the three camps will interact and cooperate remains to be seen, but all professed a great commitment to collegiality and collective endeavour at the announcement.

Will the government deliver? Past performance is no guide to future results, of course, but independent analyses by the Bertelsmann Foundation found that Germany’s last two federal governments had both implemented some 80 per cent of their coalition deals by the end of their terms.

The traffic-light coalition takes power at a troubled time. Covid-19 is once again scything through central Europe. Wider challenges abound: Vladimir Putin’s revisionist Russia, fraught relations with China, an uncertain transatlantic relationship, fractures in the EU, a German industrial model in need of renewal amid rapid technological change, demographic decline, stubborn domestic social and cultural divisions.

Yet if the motley cluster of figures likely to join Scholz’s cabinet – spanning three parties and three ideological traditions, and ranging from the traditional left to the free-market right – together manage to deliver anything like 80 per cent of the coalition agreement published today while governing in the advertised spirit of modernity and progress, then they will put Germany in a very much better place to confront these challenges. Good luck to them.

Lowering the voting age: three lessons from the 1969 Representation of the People’s Act

Posted: 03 Nov 2021 01:00 AM PDT

In 1969, the UK became the first country to lower its age of franchise to 18.Tom LoughranAndy Mycockand Jon Tonge argue that lowering the voting age was not in response to popular mobilisation by the public or pressure groups, nor the outcome of significant political contestation. Rather, voting age reform was a consequence of the desire of political leaders to align the voting age with what society increasingly perceived as the new age of adulthood. Lowering the voting age was part of package of reforms which attempted to streamline the age at which young people were seen to become adults. 

The 1969 Representation of the People’s Act, which lowered the UK age of enfranchisement to 18, has received remarkably little attention in contemporary debates. Although the UK became the first democracy to lower the voting age to 18 and most of the rest of the world followed, advocates and opponents of ‘Votes at 16’ rarely reference the 1969 Act or discuss its impacts and legacies. This oversight is surprising as ‘Votes at 18’ was the last major extension of the UK franchise and is therefore an important element of the history of UK democracy from the 1832 Great Reform Act onwards.

Lowering the voting age in 1969 provides important evidence which should – but has not yet – informed the votes at 16 debate across the UK, even in Scotland and Wales where the voting age has been revised for non-Westminster elections. Our article published in Contemporary British History, based on research from the Leverhulme Trust ‘Lowering the Voting Age in the UK’ project we recently completed, highlights three relevant lessons that can be drawn for the current UK voting age debate regarding both the process and enactment of the policy.

The first lesson from 1969 highlights the importance of the voting age being integrated into broader debates around young people’s civic rights and citizenship status. Reform of the voting age in 1969 was an alignment of age-related rights which saw the official age of majority lowered to 18. This meant that acquiring the vote was framed as part of a broader discussion about youth transitions to adulthood. In contrast, the contemporary votes at 16 debate is curiously detached from the broader context in which young people become citizens and the role that they play within democratic society. Advocates of the change often present voting age reform as a policy goal rather than as part of a broader approach to making the political system more responsive to young people’s voices and needs. Conversely, most opponents of votes at 16 tend to frame the issue as a binary debate regarding where ‘adulthood’ should begin, ignoring the more nuanced views emerging from our research showing most 16–17-year-olds want the right to vote on their own terms, not because they see voting as an ‘adult’ act. The debate around the 1969 act shows that it is possible to move beyond the narrow terms of this debate to encompass a more holistic approach to young people’s citizenship.

The less polarised political context surrounding the 1969 reform puts into sharp relief the divisions between votes at 16 advocates and opponents, providing this way the context for a second lesson. Contrary to received wisdom, there is little evidence that partisan advantage was a key motivator for Harold Wilson’s Labour government in lowering the voting age to 18. Neither Labour nor the Conservatives considered age to be an important electoral divide and there was a consensus (although little actual evidence) among politicians and the media that from the late 1950s onwards that the ‘youth vote’ skewed slightly towards the Conservatives. It was not until the 1970s that Conservatives became concerned about declining support among younger voters. Conservative opposition to the measure in both parliament and the media was therefore mild and based on classic small ‘c’ conservative concerns around constitutional precedent rather than accusations of an electoral ‘stitch-up’. This contrasts with the more partisan environment in which the debate is taking place, where age has become the largest demographic division in electoral politics. Developments in Scotland and Wales, where votes at 16 advocates were able to gain support for reform from across the political spectrum, show the importance of working towards a consensual approach. This noted, recent debates at Westminstersuggest a more divisive and counterproductive American-style scenario whereby votes at 16 has become part of de-facto political battleground about electoral reform.

The 1969 Act provides a third lesson about the need to establish a comprehensive policy and evaluation framework to ensure the long-term successful implementation of voting age reform. Whilst successful overall in terms of political and public acceptance, an important negative aspect of votes at 18 – large-scale abstention amongst 18–24-year-olds – quickly materialised and steadily increased. In 1970, the first UK election to enfranchise 18–21-year-olds, 65% of 18–24-year-olds voted. This was 7% lower than the overall turnout level, a disparity which increased to 9% in October 1974 and further grew of successive general elections until reaching a peak of 23% in 2001. The causes were multiple and significant. The passage of the 1969 Act did not identify the need for civic or political education to socialise young people with the skills and knowledge required to vote. It also failed to transform the supply side of political culture by making political parties and authorities more responsive to young people’s views, thus incentivising them to engage with the political process. Evidence from Scotland and Wales suggests that this critical final lesson has only been partially learned by policymakers, with the introduction of votes at 16 also not adequately planned or resourced, and turnout of 16-17-year-olds thus far proving consistently lower than average turnouts. It is noteworthy that one common feature of voting age reform in the late 1960s and the introduction of votes at 16 is the absence of longitudinal evaluation of its impacts on youth democratic engagement and participation.

Ultimately, the three lessons of the 1969 Act we identified highlight a missed opportunity for policymakers across the UK and internationally to undertake policy learning. We believe it demonstrates that voting age reform can be successful as a catalyst for young people’s political engagement but not if it is seen as a panacea in itself. It is vital that voting age reform is part of a more holistic approach to young people’s citizenship and engagement with the political system. Should the UK voting age be lowered in the near future, it is critical that the lessons from 1969 should be learnt to ensure its success.

______________________

About the Authors

Thomas Loughran is Lecturer in Comparative Elections at the University of Liverpool.

Andrew Mycock is Reader in Politics School Director of External Engagement at the University of Huddersfield.

Jonathan Tonge is Professor of Politics at the University of Liverpool

LSE Blog

Low tax v levelling up: the Tories’ policy tensions will not go away

Thatcherites hate the ‘big state’, but economic realities are forcing the party into messy compromises

Published: 15:14 Sunday, 31 October 2021 Follow Larry Elliott

The days of the big state are back. Plans announced by Rishi Sunak last week mean public spending as a share of the economy is on course to reach levels not seen since the Thatcherite revolution was about to begin in the late 1970s. The Iron Lady’s disciples are having kittens at the prospect.

It’s worth saying that the economy has changed substantially over the past four decades, with manufacturing accounting for a much smaller share of national output and the service sector growing in importance. Since the 1980s, the UK has run a large and persistent trade deficit in goods, only partly offset by a surplus in services.

Manufacturing’s relative decline has meant the economy has produced fewer greenhouse gases but this doesn’t give the whole picture, because Britain has outsourced its carbon emissions to other parts of the world. Factories and coalmines have closed in the UK but have opened in China.Advertisement

The bigger British cities have been able to reinvent themselves as centres for the retail, leisure and hospitality sectors, but towns on the edges of conurbations have not been so fortunate. There has been a shift in the nation’s economic geography that has allowed some places to prosper while leaving others a long way behind.

The notion of levelling up is not new. Governments have been aware of regional imbalances for decades and have tried a variety of methods to regenerate communities where the staple industry – be it coal, shipbuilding, cotton or steel – has been in decline. In the first decade of the 21st century, Labour governments recycled tax revenues from a booming City into regional aid, but when the financial crash arrived the money taps were turned off by David Cameron and George Osborne.

That has left the current generation of Conservatives with a problem. Deep unhappiness in parts of Britain that felt forgotten contributed to the vote for Brexit and to the loss of Labour’s “red wall”, but now those who backed Boris Johnson – first in the 2016 referendum and again in the 2019 general election – expect the government to deliver.

Doing so requires Johnson and his ministers to repudiate much of what happened in the 2010s. Last week’s budget, which announced real-terms increases in funding for every Whitehall department, was an example of that.

Sunak said extra money for education would allow per pupil spending to return to 2010 levels by 2024, coming close to saying Osborne’s cuts were not a great idea. Likewise, the spending on early years provision tacitly admitted that getting rid of Labour’s Sure Start programme was a mistake.

But as Paul Johnson, the director of the Institute for Fiscal Studies, pointed out, the increase in education spending between now and 2024 will be 2% a year on average, against 4% a year for health. Over the 15 years from 2010 to 2024 the comparison is even more stark: education spending up by 3% when adjusted for inflation, and health spending up by more than 40%.Advertisement

“For the chancellor to have felt it appropriate to draw attention to the fact that per pupil spending in schools will have returned to 2010 levels by 2024 is perhaps a statement of a remarkable lack of priority afforded to the education system since 2010,” Johnson said. “A decade and a half with no growth in spending despite, albeit insipid, economic growth is unprecedented. Spending per student in further education and sixth-form colleges will remain well below 2010 levels. This is not a set of priorities which looks consistent with a long-term growth strategy. Or indeed levelling up.”

In truth, the Conservatives under Boris Johnson have become something of a hybrid: a big-state party in favour of active industrial strategy with a low-tax, market-driven party tacked on. It is a messy compromise, and one that makes life a lot easier for those less conflicted about their support for a more interventionist economic approach.

A pamphlet due to be published this week by the campaign group Rebuild Britain, calling for measures to build up the manufacturing sector, illustrates the point. Unsurprisingly for a body that emerged from the Trade Unionists Against the EU group, it sees Brexit as an opportunity rather than a threat, but its argument that a more successful economy requires a stronger industrial base would be supported not just by leavers but many remainers as well.

Policy recommendations include a more competitive pound, a buy-British procurement strategy, higher investment in skills and technical training, an increase in state aid with a strong regional bias, and an expansion of public ownership starting with steel.

It would be easier for ministers to dismiss all this as a return to the “bad old days of the 70s” if much of the Rebuild Britain agenda were not already part of the current policy mix. The fall in the value of sterling since 2016 has made UK exports cheaper; the chancellor has admitted the UK lags behind other countries when it comes to skills; the prime minister announced in the summer new state-aid laws to replace EU rules on taxpayer-funded bailouts and business support; and the railways are back under state control.

Sunak is clearly uneasy with all this and wants a different direction of travel. But the tax cuts in the budget were modest in comparison to the spending increases and the tax rises announced earlier this year. The impact of the chancellor’s pet project – freeports – will be minuscule in comparison to an enhanced role for the state prompted by demography, climate change, the pandemic and past policy failures.Advertisement

Rebuild Britain is not the first pressure group to sense the way the wind is blowing. It is unlikely to be the last

Now it’s official: Brexit will damage the economy long into the future


Jonathan Portes
The Covid threat to GDP is waning, but don’t expect the pain wrought by leaving the EU to subside any time soon
Jonathan Portes is professor of economics and public policy at King’s College.
Published: 18:45 Thursday, 28 October 2021

We’re used to hearing apocalyptic descriptions of the impact of the Covid-19 pandemic on the UK economy: “the largest fall in economic output since 1709”, was the Office for National Statistics’ verdict eight months ago.
Yet the Office for Budget Responsibility, in its report on Wednesday’s budget, estimates that the long-term impact of Brexit will be more than twice as great as Covid. It thinks that Brexit will reduce UK productivity, and hence GDP per capita, by 4%, while the impact of Covid on GDP will only be 2%, with a slightly smaller impact on GDP per capita.
This shouldn’t be surprising. The fall in output in 2020 was both inevitable and desirable – it was not, in economic terms, that different from an extended holiday. Just like a holiday, we chose to shut down large parts of the economy. The difference was that it was by necessity – to save lives – rather than by choice, but the consequences aren’t that different. The economy shrank, and by a lot.
Brexit worse for the UK economy than Covid pandemic, OBR says
Holidays don’t reduce the productive capacity of the economy. If a factory shuts down for a month, the machines are still there when it reopens. Similarly, when workers return, they still know how to do their jobs. The virus does not destroy factories, roads, buildings or software and, while its human toll has been dreadful, the impact on the size or composition of the working-age population will be relatively small in macroeconomic terms.

So the worry was not the huge short-term fall in GDP. It was that temporary closures would do permanent damage to the economy. The biggest risk was that, as in the 1980s, we allowed mass unemployment to become entrenched, or viable businesses to go bust.
But, thanks to the furlough scheme and other business support measures, we seem to have avoided that risk in the UK and elsewhere. Indeed, US GDP – boosted by Joe Biden’s stimulus package – has already exceeded its pre-crisis level. The UK is not that far behind, albeit still well below the pre-crisis trend.
Indeed, the most obvious short-term economic problem in most advanced economies are now supply bottlenecks and labour market mismatches as economies reopen, leading to rising wages and shortages of some goods. But while this will – as the OBR also says – reduce both growth and, via inflation, real wages, it will mostly be temporary.
The OBR isn’t entirely sanguine – it still thinks Covid will permanently push some people out of the labour force, through early retirement or potentially long Covid, and that there will be some lasting hit to productivity. But things could have been a lot worse.
By contrast, Brexit is, by its nature, a long-term issue. Just as it took decades for the UK to see the full benefits of EU membership, we’ll still be discussing the economic impacts of Brexit long after I’ve retired.

The direction of those impacts isn’t controversial. The principle that increasing barriers to trade and labour mobility between two large trading partners will reduce trade and migration, and that this will, in general, reduce economic welfare on both sides – but especially for the smaller partner – isn’t really at issue. While there was no shortage of politicians who argued that, somehow, new trade barriers would not make much difference, or that trade with our closest and largest single trading partner could easily be substituted with trade with the rest of the world, no credible economic analysis endorsed such claims.
Nor is the OBR’s 4% estimate of the impact on the UK economy that different from that of independent economists – we at UK in a Changing Europe put it at just under 6%.
But crucially, both those (and other) estimates predated Brexit. So the news here is that the OBR has taken a hard look at the evidence to date on the actual impact of Brexit. Its conclusion, briefly, is: “so far, so bad”. That is, the UK’s trade performance this year is consistent with its original estimates that UK exports and imports would both fall by 15%.
Indeed, in some respects, the data so far looks even worse than that – UK exports have already fallen by approximately this much compared to pre-pandemic levels, while advanced economies as a whole have seen trade grow. And, again in common with external analysts, the OBR sees no evidence that trade deals with third countries, or any of the other putative economic benefits of Brexit, will offset this in any meaningful way.
No model includes everything. The OBR’s is no exception. It hasn’t accounted for the damage done to education during the pandemic, especially for poorer kids. Here, the government’s failure to fund a serious catch-up programme could leave permanent scars – both economic and social. And, on the other side, a more liberal migration system towards non-European migrants could, in principle, offset some of the damage of Brexit.
But so far, it looks as if, from an economic perspective, Covid is for Christmas, while Brexit is for life.


Jonathan Portes is professor of economics and public policy at King’s College London

https://www.theguardian.com/commentisfree/2021/oct/28/economy-recovering-covid-brexit-eu?CMP=Share_iOSApp_Other

Politicians talk about net zero – but not the sacrifices we must make to get there


John Harris
Too few leaders will arrive at Cop26 bearing any mandate for serious climate action, because hardly any have tried to get one

To be facetious about it, they only have 12 days to save the Earth. As politicians and officials from 197 countries begin just under a fortnight’s work at the Cop26 summit in Glasgow, you can sense a strange mixture of feelings: expectation, cynicism, fatalism, anger and fragile hope.
It will be easy to lose track of what is at stake and who is who – although anyone feeling confused should recall the report issued in August by the Intergovernmental Panel on Climate Change and its bracing conclusion: that huge environmental changes triggered by global heating are now everywhere, and avoiding a future that will be completely catastrophic demands “immediate, rapid and large-scale reductions” in carbon emissions. The point is simple enough. But one familiar factor may well weaken the resolve of the key people at Cop26: the fact that too few politicians will arrive in Scotland bearing any mandate for serious climate action, because almost none of them have tried to get one.
Two crucial political problems define the contrast between what is required and what those in power have so far chosen to deliver. One centres on the populism and power cults that actively get in the way of climate action – something evident in both the records of strongmen like Donald Trump, Vladimir Putin, Brazil’s Jair Bolsonaro and Turkey’s Recep Erdoğan, and where our ecological emergency sits in the cultural and generational conflicts that are now bubbling up all over the world.

In the UK, the latest manifestation of the populist right’s belligerent scepticism is the suggestion that we might rerun the Brexit referendum in the form of a vote on whether or not to pursue the goal of net zero carbon emissions. You also see it in those seemingly daily video clips of some or other sub-Alan Partridge TV or radio host arguing with someone from Extinction Rebellion or Insulate Britain, a ritual which feels like a new national sport.
The other impediment to action is more insidious. On both the centre-left and centre-right, there is superficial recognition of the hard yards required to do something about the climate emergency but, so far, an aversion to thinking about the huge changes to everyday life that will be necessary. “We can build back greener without so much as a hair shirt in sight,” says Boris Johnson.
Keir Starmer may not have uttered anything so crass, but he too seems to believe in a modest utopia of a new green economy, insulated homes, increased funding for science, and the day somehow being saved by British derring-do. “Climate change is about jobs,” he insists, which is partly true. But, like Johnson, he doesn’t mention revolutionising what we eat and why and how we travel, or – God forbid – the continuing fetishisation of economic growth.
Might that be an inevitable feature of democracy? Perhaps. But in the UK, the first focus of blame should be the two-party Westminster model of politics kept in business by our stupid electoral system, and the way that it sustains political philosophies that ought to have been left behind in the 20th century.
On the right, notwithstanding Johnson’s swerve into the politics of big spending and economic interventionism, Toryism remains beholden to the market, and dead against the idea of the common good shaping the lifestyles of anyone who is halfway affluent (the poor, of course, are fair game). Its contorted priorities are illustrated by the fact that the government’s current leading lights managed to take us out of the European Union at a huge cost to national income and the country’s economic future. But they cannot muster anything like the same enthusiasm for risking some stability and prosperity in the interests of saving the planet.
And Labour? Here is a radical thought: given his beleaguered position and the urgency of the crisis, Starmer could conceivably go for broke, and predicate his leadership on the climate emergency, finally bringing its scale and urgency somewhere close to the heart of politics. The thought, unfortunately, would not even occur, because of what the Labour party is. Its origins lie in a world of coalmines and smokestacks. Like its sister social-democratic parties in Europe, whatever reinventions Labour has undergone since, it has a deep, sentimental attachment to an idea of the good life centred on work and the factory, and raising people’s living standards so that they can consume with the same enthusiasm as everyone else. At the most basic level, it shares the Tory idea that growth is the sine qua non of economic policy.

During the Corbyn years, some of this stuff was undoubtedly shaken up, although there were also signs of a conservatism that still runs across all wings of the party. In 2015, as he ran for the leadership, Jeremy Corbyn endorsed reopening mines in south Wales. Four years later, as Labour decisively embraced a so-called Green New Deal in preparation for the 2019 election, some of the big unions – who represent gas, oil, and aviation workers – insisted on 2030 being a target for “significant progress” rather than a non-negotiable net zero deadline.
It is worth remembering the view of the then leader of the GMB union, Tim Roache: the latter stance, he raged, would mean “within a decade people’s petrol cars being confiscated. This will mean families can only take one flight every five years. Net zero carbon emissions by 2030 is utterly unachievable.”
So, which way out? As a means of at least trying to reorientate our politics, a lot more people are going to have to vote for the Green party – and, to maintain the sense of last-ditch urgency that Extinction Rebellion have brought to things, the case for what some people call extra-parliamentary activity feels beyond argument. Without wanting to sound overly pessimistic, the most likely outcome of all the negotiations and diplomatic theatre in Glasgow will push even more people in that direction, and their protests will bring on the usual sneers and priggishness, not least from Westminster politicians. But as ever, the people involved will have a simple answer: that if politics endlessly fails, the streets may be all you have left.

https://www.theguardian.com/commentisfree/2021/oct/31/politicians-net-zero-sacrifices-cop26-climate?CMP=Share_iOSApp_Other


John Harris is a Guardian columnist