So many are working so hard for their poverty: we need a new everyday economy

Rachel Reeves
© Chris McAndrew/CC BY 3.0

The transformation of global and national economies have divided countries in the developed world. Metropolitan cities have taken the lion’s share of wealth and power. The peripheral spaces, urban hinterlands, provinces and ex-industrial areas have become neglected and impoverished. How should Labour respond to this division and inequality in our own country?

In my pamphlet The Everyday Economy I set out the case for a new Labour political economy focused on the everyday economy of work, family and place. I argue that it will strengthen Labour’s role as the party of the labour interest, rebuild its divided electoral coalition and undertake the task of rebuilding the country.

The everyday economy is the combination of private, public and social sectors in every region whose services, production and social goods sustain all our daily lives. The foundation of our country is the hard work by under-appreciated people earning an often meagre income. Without them, our schools, nurseries, care homes, warehouses, food processing centres, supermarkets, hotels, restaurants and hospitals would close. The utilities, broadband and our public service infrastructure would fall apart. The everyday economy binds our communities together.

40 years of globalisation and financialisation have given us growth in trade and lower prices. But the balance of power between capital and labour shifted decisively away from working people. Wages suffered a 10% fall between 2007 and 2015. Household debt is rising while the savings rate has fallen.

And in the old industrial regions, jobs have been exported to low wage economies or lost through new technologies. The pride and dignity of skilled work has been replaced by often low-paid jobs, unemployment and insecurity. The cost has been higher levels of chronic physical and mental illness. Hundreds of thousands of people work hard for their poverty. Life has become much more insecure and people are falling into poverty and homelessness, and children are going to school hungry.

Our country is divided. We need to reform our economic system in order to safeguard our society. Many of the solutions must be local, but in a country as centralised as Britain, we will need a national plan not only for improving the quality, pay and productivity of jobs in the everyday economy, but also for strengthening the capacity of Britain’s regions, towns and cities to shape a fairer economy.

Industrial policy has had little or nothing to say about the everyday economy. Instead it has concentrated on the cities as engines of growth, on property development, technological innovation and the high productivity trading sectors. It neglects the middle and low paid in the low productivity, non-traded sectors. It neglects the civic infrastructure required to develop research and innovation across the whole economy, not just the high performing firms. It tends to exclude rural areas and towns from the wealth creating activity it is promoting. And in the areas that have benefited the most, a huge proportion of the jobs created have been underpaid and in the everyday economy. Extremes of poverty continue to exist within the most prosperous parts of Britain.

We must prioritise the things that really matter to people: decent work and wages, secure families and households, and prosperous local places to live. Labour must break with traditional top-down, command and control politics and devolve decision making, resources and tax raising powers to our English regions, cities, towns and counties. Involving local communities and their insights will lead to better policy. Helping build up their capacities to effect change for themselves is essential. Effective devolution demands a radical change in how central and local government works.

In the last decade, a powerful body of work has been developing a place-based economics. Karel Williams and colleagues at CRESC  created the idea of the foundational economy. They are pioneering the use of social licensing to make companies more accountable to the communities in which they operate. Companies operating in the foundational economy often depend on government support, and frequently enjoy near monopoly power within the places they operate. The community depends on the goods or services they provide, but equally, they depend on the local community to operate. A social license, attaching more rigorous conditions to planning permission or to funding they receive, can make explicit the company’s responsibility to those communities on which they depend.

The Centre for Local Economic Strategies have been developing practical policies of local wealth building. Their idea for a Unit for Local Wealth Building at the heart of government could create a national economic plan by which we build local capacity, and organise the cross departmental collaboration necessary for its implementation. We must use the centralised institutions of Whitehall to build up local, autonomous power.

We need to spread capital across the country, providing commercial loans on a long term basis to local businesses. ‘Anchor institutions’ such as hospitals, universities, large businesses and schools can be used to help develop local economies through their procurement policy, by driving up wages through Living Wage deals, and by spreading innovation down the often poorly performing companies in their supply chains. As IPPR’s commission on economic justice recommends, an industrial strategy must have a strong spatial dimension.

In a recent paper, the geographers John Tomaney and Andy Pike summarise this work as the economics of belonging. They are critical of centrally imposed city region devolution. Their alternative is a place-based development strategy which innovates institutional arrangements that respond to ‘international patterns and dynamics of geographical change’. Deindustrialised places suffer economic disadvantage but they retain valued community ties and strong social bonds. Many do not wish to leave to seek greater opportunities elsewhere, and those that do often can’t because of our lopsided housing market. Instead of just looking to offer people a route out, an economics of belonging must think in terms of bringing prosperity, opportunity and good work to these places, and restoring their civic infrastructure.

Labour has committed itself to rebuilding Britain in the years ahead. We need to focus on the everyday economy, guaranteeing universal basic infrastructure, building up locally owned assets and stimulating demand-side policies.  The labour movement built its political power around the everyday economy of work, clean water, utilities, housing, education, and social services. It grew its roots in local places protecting working people, their neighbourhoods and their family life. A politics of community and belonging was forged alongside workplace struggles. Times have changed, but the task remains the same.

This piece was commissioned by Labour Together, which is guest editing LabourList this week.

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