What is the foundational economy? - PowerPoint Presentation

Slide1

What is the foundational economy?

(and how to build social citizenship) Joe Earle, Julie Froud and Karel Williamsfoundationaleconomy.com

“The economy” is a post 1940s invention: GDP based management + polit. promise “ vote for us and we will make the econ. work for you”

FE revives an earlier alternative zonal concept of economies (in the plural):

as in Fernand Braudel or E.P. Thompson

Why the FE matters? infrastructure of everyday life which keeps us safe and civilised

On the demand side,

all households depend daily on essentials where interruption of provision = immediate crisis: providential services like health services and care, universal primary and secondary schooling = the badges of our civilisation material infrastructure

of pipes and cables connecting households to systems which make everyday life possible, safe and added 20 years to urban life after 1880

On the supply side,

these activities distribute welfare through waged employment: eg in UK typically 30% in the providential, a more modest 15 % in material infrastructure; roughly equal distribution across regions with networks and branches according to local population

So, how does this

unthink

“the economy”?

recognises the heterogeneity of consumption

We do not confuse the tradeable part with the whole economy;

nor confuse infrastructure with railways and pylons;

and we do not make the GDP/ GVA mistake of adding up heterogeneous activities according to market value

Foundational thinking recognises the heterogeneity of consumption and adds other differentiators

Zones are differentiated in terms of norms and practices

about

eg

sources of revenue, typical business model, organisational forms and status as policy objects

And these secondary differentiators are not fixed but change over time

within one zone; change is partly through the incursion of norms from other zones (what Braudel and Thomson described with the expansion + incursion of the market)

Form of consumption

ExamplesProvider business model

Source of revenue

Organisational

mobility and mortalityPost 1980s public policy

Core Economy

Non-economic because "we must love one another and die"

Parenting, voluntary action etc.Gifting: no charging or recovery of costGoodwill

Re-invented forms e.g. divorce and marriage in our generation

When the state retreats, try volunteers

Foundational Economy

Daily essentials via infrastructure of networks and branches

Material e.g. food, and utilities; Providential, health and care, social housing

WAS low risk, low return, long time horizon for public and private providers

Tax revenue for free at point of use or subsidised; or regulated private purchase

Low mobility and mortality as networks and branches 'ground' firms, stable demand

Privatisation

, outsourcing and shareholder value = new business model

Overlooked Economy

Occasional purchases of mundane, cultural necessities

Takeaway food, sofas

Financialized corporates vs SME and micro pro lifestyle and getting by

Discretionary from market income

High mortality in small firms and structural shifts e.g. streaming not DVD

Below the policy radar if firms too small to take outside capital

Tradeable, competitive Economy

(aspirational) private purchase

Cars, electronics, new kitchens and bathrooms, private housing

IS high risk, high return, short time horizon

Market income from wages (state subsidy for R & D, training etc.)

High mobility as footloose under free trade; cyclical demand

Business friendly, structural reform

A policy history of the FE :

“municipal socialism” to national settlement

If you think foundational, then one key role of public policy is to secure the supply of basic services for all citizens; a SOBO for R H Tawney “ what a man cannot buy by working overtime” or J K Galbraith “private affluence and public squalor” Now rediscovering how market incomes do not guarantee foundational provision

(

eg

unaffordable housing In London now or gilets jaunes on fuel in France = the issue of household residual income after housing and transport) Foundational provision is now + always was of the European right as much as the left Urban common sense pre 1914: gas and water “ municipal socialism“ ex conservatives or liberals eg 1870s Birmingham National settlements after 1945: led by Social Democrats but co-opting Xtian democrats

how did it go wrong after 1979?

privatisation, out sourcing + and

mis-selling

FE public or private (municipalities or railways) was historically 5% ROCE

in activities which were low risk, long time horizon

Post 1979 financialised private firms (Public Limited Companies and Private Equity)

bring in unsuitable 10 % plus ROCE high return business models ex high risk, high return activities:

Privatisation

= cash extraction ex monopoly with ineffective regulation

(

eg

UK water loading with debt while distributing profits or energy firms doing confusion pricing )

Outsourcing

imports instability

ex leveraged search for returns (

eg

Four Seasons care homes) or PLC conglomerates falling over as chase earnings growth ( Serco + the rest)

Mis-selling with fines becomes an acceptable cost of doing business

eg

retail banking and PPI or European diesel cars = efficient breaches of the law

FE is

not about the right “econ. policy” but about social citizenship

Recognise distinctiveness of FE spend:

Morally,

essentials eg housing or legal aid = unlike a dress from Primark; collective benefits ex eg clean air in cities are distinguishable from individual feel good ex a new kitchenEconomically, requires collective systems investment eg infrastructure for public transport or branch provision as with A and E departments; individual can buy a smart phone but not 4G in trains Politically, FE provision is often a matter of citizenship and entitlement eg health or education: FE is about social citizenship as defined by Marshall “ the right to live the life of a civilized being according to the standards prevailing in the society”

Why the FE is + should be

politically contested and deliberative

FE is about finding out what to do with citizen input amidst political dispute;

mainstream economics is about knowing what to do so experts can choose the right policies;

Sources of dispute

rights and duties of citizens

= natural persons and corporations:

eg

is housing for citizens asocial right not individual asset

eg

“ business friendly “ vs raising the social ask with new duties for corporations

role of political actors:

eg

is collectivism to be led by the state as socialists and free marketeers assume; or should intermediary institutions (

eg

housing associations) play a part as liberal collectivists argue

participative and deliberative role

for the citizenry; classic delivery was top down and technocratic

cf

hospital provision in the 1950s vs what kind of older care now

So how to stop the radical right ?

four democratising political shifts

Across Europe we have the new instability with the radical right setting political agendas.

Dutch fragmentation; German or Swedish 3/4 way split with radical right and left; Spain or UK with new left or split left parties.

“Inclusive economic growth” isn’t going to happen and in any case won’t fix the FE, so four political shifts

Get participation by asking citizens

about FE priorities and organising deliberation

Extend social influence over business

by licensing corporate business which wants to tap local demand

Reinvent taxation especially of wealth and unearned income

to secure foundational revenue and capital investment

Create political alliances

for changing foundational policy on the basis that government is not always benign or capable

NB a multi level national, regional and local agenda

So, what’s the role of expertise?

citizen friendly

Many of the issues

eg

air quality or type 2 diabetes are technical and require expertise;

But, under “ business friendly”, expertise has collapsed into facilitating business

, especially private developer led regeneration which does not know how to stop (

eg

Manchester 50,000 1-2 bed new flats in the centre + no social housing

tho

’ 80,000 on the waiting list)

What we need from expertise is citizen friendly

Regional and national strategies on water, air, energy, food and housing

on the Barcelona

model;

so that political debate is formatted + targeted, popular politics has a matrix of FE priorities for deliberation

Dispersed expertise so that it is not making field trips from the town hall but in the communities

and integrated through various processes like asset based community development or citizens’ juries

The argument summarised