The Good, the Bad and The Ugly
The Good, The Bad and The Ugly. It’s not often that Spaghetti Western titles provide a framework for economic analysis. But this sums up the choices facing the economic recovery from the Covid-19 crisis.
We went into this crisis with a quarter of our people getting paid less than they need to live on, a third of our kids in poverty, and our planet facing ecological catastrophe within a generation.
Now here’s the rub. How do we make sure that the recovery is about wellbeing and sustainable green growth that works for everybody?
There’s stark choices to make in deciding how we rebuild.
Let’s start with the Ugly.
A full-on shock doctrine combining a more authoritarian state with uncontrolled corporate capitalism. The government tried making some carers and NHS staff pay twice to use the NHS, just because it’s popular to blame immigrants.
Cowboy economics assumes infinite resources. When one area is used up, move on to another to exploit. When small companies go the wall, corporate raiders hoover-up their assets at cut prices. Outsourcing on steroids. The approach of Trump’s America.
Crippling austerity will be used to “pay for” the emergency response to the pandemic. The Ugly subordinates everything to the “free-market” – which is anything but free. Procurement rules are thrown out so contracts go to close contacts. This approach has led to the highest death rate in Europe. Working people are just cannon-fodder for corporate machines.
Economic growth is encouraged by “supply side economics”. Or more accurately, letting the mega rich avoid taxes. In just one example, Virgin have taken £2 billion in NHS contracts and not paid a penny in corporation tax. They’ve sued the NHS for £2 million when they didn’t get the deal they wanted, and walked away from the East Coast Mainline rather than pay what they owed. Registered in the British Virgin Islands tax haven, the Virgin group takes the wealth created by working people to pay for private islands.
The Ugly is not pro-business, it’s pro-billionaire. Take this approach, and we’ll see a second spike followed by a generation of talent squandered through rocketing youth unemployment, in work poverty, and rising crime.
There’s a conflict amongst the establishment. The Financial Times is calling for a “more sustainable and inclusive form of capitalism.” Many in Treasury recognise the need for “fiscal stimulus”.
The default approach is to kick-start the economy by spending billions on concrete and tarmac. More road widening, roundabout upgrades, and shiny new schools and hospitals. Funded by quantitative easing, government borrowing, and “departmental savings”. We’ve been here before with PFI. Lovely buildings, but “departmental savings” mean we can’t afford to pay the teachers and health professionals we need to work in them.
It assumes that any spending in the economy will reach everyone equally. That wealth “trickles down”.
It doesn’t, and it never has. Wealth trickles up. That’s what interest is – those with money to spare take interest from those too poor to make ends meet. It widens the wealth gap. And it costs us all a fortune in poor health, poor education, and innovative small firms struggling to get the funds they need to grow.
Whitehall is already talking about pay freezes for public sector workers and turning a blind eye to the bankruptcy councils are facing.
The Good means putting local economies front and centre. Sometimes called Community Wealth Building, it’s a set of place-based policies that work together to make sure that we all earn more and spend more locally.
It means shortening supply chains so we build here. It means the public sector spending its money with local firms who pay the Real Living Wage and have sustainable operating models. It means funding training for workers to take new jobs in new industries.
It means abandoning the carrot-and-stick approach to unemployment, instead providing tailored help, whether that’s digital skills training or mental health support.
It means new ways of supporting innovation, not with tax breaks, but with public ownership and partnership investment in our start-ups. New approaches to house building that supports local firms and ownership, such as community land trusts. It means banks owned by local communities.
And it works. The Spanish Basque country rejected the free market fundamentalism. Its place-based economics has given an otherwise poor region a per capita income way above the EU average and an acclaimed environmental and wellbeing rating. It’s being rolled out in the UK by the Welsh government, and councils including Preston, North Ayrshire, and Newham. And The North of Tyne.
Post-1945 we faced a choice. Go back to the depression and slums of the 1930s. Or go forward, build the NHS, public housing and welfare state. The Bad and The Ugly won’t level us up. Only The Good will.
(Published in The Chronicle and The Journal on 1st June 20)