Our Priorities for 2015; Get Involved and Help us Achieve Them

In 2014 our focus as an organisation was developing our ideas for how to bring about a more fair and sustainable economy in Manchester and the wider region. We launched the Viable Economy, building upon our previous interventions, it is a pamphlet and a manifesto for an alternative approach to how the city and region could develop, in a way that is viable in all three of the social, economic and ecological domains.

This year, we will build on this by concentrating on sharing ideas for a Viable Economy with others, with a view to creating and advocating for policy, and promoting and learning from practice and examples which demonstrate aspects of the viable economy in action.

We aim to be more outward facing as an organisation, increase and broaden our public visibility and impact and connect with more and more diverse groups of people. In addition to having an impact in key areas of our economy and society.

Our core aim remains unchanged: to engage with decision-makers and the wider public within Greater Manchester to promote and support the understanding, and ultimately the implementation, of a Steady State Economy and Society.

This year we plan to:

Generate more interest and understanding of the viable economy

  • Increase the reach of our communications and engage with a broader range of groups, promoting understanding and debate about a viable economy.
  • Use available data about the GM Economy to communicate its flaws and how to pursue more viable economic development.
  • Develop a systematic strategy for influencing decision makers in GM.
  • Better develop how a viable economic strategy for the city region connects to social policy and specifically social care.

Generate more action around the viable economy

  • Follow up our scrutiny of the ethics and viability of Manchester City Council’s investments and explore mobilising funds for local/viable/ecological investments, including how fossil fuel divestment can be linked to re-investment in community owned energy.
  • Develop a spatial vision and agenda for developing the economy as a garden city and identify levers to bring it into being.
  • Influence improvements in working conditions and connect these to viable economic development.
  • Explore and help to facilitate the possible development of a local currency.

Measure what matters: economic, social and ecological well-being

  • We will make use of available data to report on the city regions well-being and prosperity and promote the use of better prosperity indicators by Local Government.

Develop as an organisation

  • Become more participative, open, inclusive and diverse.

If you’d like to see these goals come to fruition and would like to get involved, in one or more of them, contact us: steadystatemanchester@gmail.com, we’d love to hear from you.

Is #DevoManc a missed opportunity?


wasted opp

What’s happening?

Greater Manchester is to get an unprecedented devolution of power from Whitehall. These devolved powers from London cover a variety of strategic areas:

  • a new housing investment fund of up to £300m, with the aim of building up to 15,000 more homes over 10 years

  • greater planning powers

  • responsibility for local transport, including power to run franchised bus services and provide Oyster-style integrated tickets

  • welfare-to-work programmes, with a budget of £100m, to help up to 50,000 people back into work

  • control of existing health and social care budgets, which have been pooled by local authorities across Greater Manchester

  • greater responsibility for business support and further education

  • up to £30m a year for the growth generated by its economy

These budgets of around £1Bn will be controlled by a new Greater Manchester mayor, directly elected from 2017 with an interim appointee. There will be a committee of the leaders of the 9 GM councils but unlike London, Scotland, Wales or Northern Ireland, no elected assembly. Not all powers will be devolved: significantly education, but this could, according to Richard Leese amount to some two thirds of public spending in the “city-region”.


What’s good about this?

That our region is getting more power over its own affairs must be a good thing, and it is clear that the city’s leaders have worked for this for years. The UK is far more centralised than other countries of similar size. Since the time of the Thatcher governments local government has been, as they say, “hollowed out” with limited autonomy and ever reducing responsibilities: gone are education and housing, and it now seems incredible that it was local government that established our water, sewage, power and telecommunications, as well as part of the health service.

Making decisions more locally, in theory, should make them more responsive and accountable to the needs and interests of people locally, and so give us better policies, plans and actions, improving the lives of all of us in Greater Manchester ……… but will it?


What’s wrong with it?


The democratic deficit

Until the Thatcher regime abolished it, we once had an elected government at regional level. This was in the first place at the level of the county – something that broke down with increasing urbanisation, and our region being split between former Cheshire and Lancashire (and bits of Derbyshire and Yorkshire). In the 1973 reorganisation, we got the Greater Manchester council (to the consternation of people in Wigan and Saddleworth!), but mainly because of the popularity of the Greater London Council and Ken Livingstone, as a site of radical innovation and resistance, the Tories simply abolished that tier.

The new arrangements give no proper democratic accountability for the regional level. It is insufficient to vest that in one person who can be expected to understand, debate and deliberate over the multiple perspectives and interests of the region’s many peoples. And nor can the gang of nine council leaders, who will represent their own localities and parties, but not directly represent or interpret that diversity. As any systems scientist can tell you, it takes diversity to represent, interpret and act in an environment characterised by diversity but what we are getting is a technocratic-managerial fix, poorly suited (if sharp-suited) to heal the legitimation crisis of our failing democracy. Perhaps the rather strange way the “deal” appears to have been negotiated should be seen as an omen.

And on the same theme, the people of Greater Manchester are not being given any say in these arrangements – although there is a campaign for a proper consultation and referendum. In Scotland that led to a resurgence of interest in politics and to political mobilisation, a kind of renewal of popular politics. Maybe that’s what George Osborne and the Manchester leadership are afraid of.

So that’s the first missed opportunity, that of restoring democracy to our region. That could be a moment of creativity – we could have a small assembly whose members report back to their constituents via regular public meetings. They could be subject to recall. It could be run cheaply: it doesn’t need the glitz of The Greater London Assembly.


What’s the region?

The new deal sticks with the 1974 Redcliffe-Maud definition of the region, that corresponding to the council areas of Manchester, Salford, Wigan, Bolton, Bury, Rochdale, Oldham, Tameside, Stockport and Trafford. We have long argued that this is an inadequate definition of the region. Whether considered in terms of the “travel to work area”, or more creatively in terms of a potentially, relatively self-sufficient eco-region (or bio-region) it makes more sense to think in terms of a wider area, incorporating the city-region’s hinterland. We have argued that the upper Mersey valley watershed area is roughly what we should be looking at.

Consider energy and carbon pollution. Much of the energy that the region needs could be generated in this wider area, whether we are talking about wind, hydro-electricity (and pumped storage), geothermal or (limited) biomass. Connecting with potential sources of tidal power on the coast implies the obvious – an eco-region has flexible boundaries. But we also need to consider positive policies to capture carbon dioxide, and prevent its emission, from the upland areas, via forestation, and from wetland areas.

And what about food? In a world of increased turbulence, climate change and energy crunches and emissions reduction, we need to look at more local food production, and a considerable amount could be sourced within this wider regional footprint. 

Whilst devolution of powers to the region could be a platform for an integrated approach to developing a more resilient regional economy and developing food and energy security and sovereignty, its clear from the content of the deal as well as the delimitation of the area that this is not the priority.

As it stands, the model is disappointingly urban-fixated. As Neil Ward has noted, the city-region concept is a political concept rather than a reality on the ground, concerned with shoring up the settlement patterns of a epoch that is passing.


What priorities?

The dominating concern of both Chancellor of the Exchequer George Osborne and of Manchester’s leaders is economic growth. What we might call city-region boosterism draws on the work of the Manchester Independent Economic Review which was about “agglomeration”, the idea that bigger groupings act as attractors of investment and platforms for economic development (hence the welcome improvements to train connections with Leeds – foolishly called HS3). This all gets reduced to the short-hand of economic growth, notwithstanding the well-understood problems with the concept. The first problem is that such growth destroys the planet and far from enabling us to take mitigating action, it makes it ever more difficult to do so. Instead as we, and others, keep arguing, we need a different model, one that emphasises the local creation of wealth, the conservation of resources and fair distribution, together with measures that reflect these things and not the abstract, opaquely calculated figure of GDP and its growth, which as University of Manchester professor of economics Diane Coyle explains, should be dumped.

So it looks very likely that DevoManc will give us the wrong kind of priorities, those that continue the unviable economy we already have.


Trickle-down and redistribution.

Secondly, the prosperity generated by economic growth does not reach all the population, reinforcing the great inequalities we already see. As Manchester Evening News political columnist, Jennifer Williams, put it:

Years of under-investment in the north is not going to to be fixed overnight. And what investment there has already been has not trickled down. Council figures show those working in the city of Manchester earn 20pc more than those who actually live there.

In other words, the gleaming new towers of the last two decades are still out of reach for ordinary Mancunians.

It is interesting to look at the theory that seems to underpin the DevoManc model (and that of the current city leadership). It goes something like this:

Improve the skills of the people of Manchester, so that they can compete for contracts and investment with other parts of the UK, Europe and the World. That will mean investment in shiny projects in the city and the wealth will spread to everyone.

But that thinking is flawed. Imagine there is a crowd of people watching a sporting event from the edge of the field. The ones at the back can’t see. Nor can many of the ones in the second and third rows. So some of the people at the back get boxes to stand on. But then so does everyone else, except those in the front row, who already have, in their way got boxes already. So the ones at the back, unless they can get bigger boxes, still have the same problem. Meanwhile, the trees surrounding the sports field have been chopped down to make the boxes. And in the case of the global economy, the obvious answer – bigger boxes for the ones at the back, is unlikely to be agreed: the opposite in fact: bigger boxes for those who can already afford the best positions, so to speak.

The theory of agglomeration; attracting skilled workers, the ‘creative class’ and creating the conditions for investment through focusing on infrastructure and promotion of the city as an attractive location, is the expression in regional economic development of failed neoliberal economics. It minimises public intervention in the operations of the market and economy and suggests that only supply side interventions are permissible. They would, the theory goes, make the labour market work better and focus on infrastructure. Investment, employment and growth will all be taken care of by operations of the private market. It falls down not only because of the futility of competition between cities competing for mobile global capital but even when there is moderate success in this endeavour. Jobs, revenue and reductions in inequality do not materialize, as tax breaks to attract investment or easy tax avoidance starves public revenue and hyper mobile skilled workers thwart local job creation in the prized sectors that, after all, represent a fraction of employment compared to the majority, low productivity but fundamentally essential foundational economy which should be the backbone of local prosperity.

A programme for regional devolution should aim to bring about a more viable regional economy, a more equal and sustainable economy, where there is universal access to high quality foundational goods like efficient affordable housing, food without an ecological deficit and adequate care and support for the more vulnerable. Incomes for workers who provide these goods should provide a liveable income standard. It should aim to seal off the leaks from both the glamorous and the foundational economic sectors which make the city a site for value extraction and skewed wealth concentration.

Measures to bring about this change through more regional economic powers and collaboration would include examples from progressive local government in the UK and across the world which constitute active interventions in key sectors of the economy, acknowledging that its not sufficient to leave the creation of prosperity to foreign investment. For example, the public ownership of utilities, like the energy grid in Hamburg, could be a vehicle to support a fair and de-carbonised, distributed energy system. The creation of a public bank, similar to Cambridge and Counties for recycling idle funds into the regional real economy could mirror Germany’s municipal banks.

Actively building fair supply chains which keep value circulating fairly and locally by incubating co-operatives to provide services to the regions Anchor institutions, Universities, Hospitals including the Local Government itself in areas like adult social care, as demonstrated by the Evergreen Co-operatives in Cleveland.

So DevManc is looking like a missed opportunity. A missed opportunity to rebuild democratic legitimacy, and a missed opportunity to create a new kind of region, with an economy that works for all, while not destroying the planet.


What is to be done?

There is a campaign which you might like to support for a referendum on the deal. This is what the petition calls for:

We call for the "Greater Manchester Agreement: devolution to the
GMCA & Transition to a directly elected Mayor" and any other
such future plans for 'devolution' affecting the people of the area,
following a sufficient period of public debate, and scrutiny of the
Agreement, to be put to a Greater Manchester wide REFERENDUM, BEFORE
it, or any other future devolution proposal, is implemented.

Beyond this, and it is sadly not clear whether that campaign will capture a popular mood, it is important that we all keep making the arguments for a devolution that is democratic and focuses energies on making a meaningfully defined region capable of delivering real prosperity and resilience to its people while stewarding the earth systems we all depend on.

Postscript 24/2/15.  It’s worth a look at this blog post by Iain Deas of Univ of Manchester. Certainly more enlightening than the puff pieces in Guardian and Saturday’s (21 Feb) Financial Times.  HERE.

Mark H Burton and Benjamin Irvine

Steady State Manchester collective.

The Viable Economy serialised – About the Environment

We continue the serialisation of our intervention, The Viable Economy, this time with Chapter 10, “About Environment”.  You can download the whole pamphlet as a pdf file, here.
If you like it, why not make a donation towards our work. Our costs are modest, but we are unfunded.

10) About Environment

The problem

For the unviable economy the environment is just an afterthought. Yet without the environment, there is no basis for its operations, since it is the source of its inputs, and where it puts its wastes (“resources and sinks” is one way of describing this). The invisibility of the environment to conventional economics leads to a naïve, misplaced optimism that technology and markets will come up with solutions to those problems that are increasingly recognised by society. The conventional emphasis on growth (narrowly defined in terms of GDP) leads to various kinds of delusion that the impacts can be resolved, for example by improved energy efficiency, that growth can be disconnected from the flow of materials from extraction to pollution, despite the complete lack of evidence that more than a relative decoupling is possible1. And conventional economics has a further sting in its tail when it tries to convert the ecosystem into monetary value, commodifying the natural world, displacing forest dwellers, and bolstering carbon emissions through trading and financial speculation in them.

It is ever clearer that the global economy (and the UK is nominally the sixth largest national economy2) is destroying the very basis for life on earth by crossing a number of ‘planetary boundaries’3. This influential framework, together with that of ecological footprints4, gives us a basis for defining the limits to the scale of the viable economy.

The viable alternative

In the viable economy the environment is treated as fundamental, as what makes human life, including the economy, possible. Economic activity has to nurture, protect and repair the ecosystem which means favouring ecologically positive and neutral forms of production and distribution, while maintaining human life on a fair basis.

This requires planning to keep the ecological footprint of society and its economy within the available biocapacity (currently exceeded in the UK by some 200 per cent. Rather than the emissions trading scheme currently in use (with its unrealistically low carbon price) we advocate a cap and share system that while controlling the emissions of the big players is also a redistributive mechanism5.

Steady State Manchester's model

Figure “The curved arrow at the bottom indicates the impact of our lifestyles
on both ecosystem and economy, and our responsibility to plan, protect and nurture.” In Place of Growth, pp. 11-12 (Our revision of the Manchester Community Programme’s model). see http://steadystatemanchester.net/2012/10/08/steady-state-manchester-in-pictures/ for a comparison.

Some viable policy ideas

  • Integrated accounting so environmental impacts, linked to economic indicators, appear on balance sheets, annual reports, prospectuses etc. So for each job created, for each pound spent, at, say Airport City, what is the net change in carbon emissions, biodiversity loss, nitrogen pollution, and so on?

  • Action plans for the reduction of hydrocarbon fuel usage within a bioregional cap. The cap could be set on a shadow basis at first, becoming mandatory over say a five year period. This could be complemented by modelling of the impact of a cap and share scheme.

  • A bioregional framework for ecosystem protection and restoration, including evidence-based measures to maximise soil, wetland, bog and woodland carbon sequestration.

  • Focus local investment vehicles (such as the municipal / bioregional investment bonds discussed elsewhere) on the green economy, local food production and processing, energy reduction, human-powered and public transport.

  • Establish the degree to which human waste is used as an asset for ecosystem restoration and horticultural investment: plan to maximise this with public planning and incentives.

  • A recognition of our responsibility for ecosystem damage worldwide: a commitment to reign in harmful processes and to fund restoration.

  • Dis-incentivise private motor transport (except for those who have no reasonable alternative), encouraging walking and cycling and providing clean effective mass transit.

1See our commentary on the New Climate Economy report http://bit.ly/1B0esgx

3Rockström, J., Steffen, W., Noone, K., Persson, Å., Chapin, F. S., Lambin, E. F., … Foley, J. A. (2009). A safe operating space for humanity. Nature, 461(7263), 472–475. doi:10.1038/461472a and for an application see http://www.kateraworth.com/doughnut/

5See note 32

A new approach for our cities?


I attended a two hour seminar on Future Climate organised by the North West Climate Change Partnership It was a rather depressing affair since it seems quite clear that we are rushing headlong towards a climate catastrophe and all the speakers could really do was map the dimensions of our collective global failure to avert it, with an excess of giant powerpoint data slides.

Perhaps the most coherent of the presentations was from Jon Lovell who (rather surprisingly?) works for Deloitte, one of the big accountancy/consultancy firms. I’m going to pick up from his last point which was that a “new paradigm” is needed for the “urban-globalisation nexus”.

What Jon was referring to was the well documented urban trend towards living in cities, and the growth of the population of those cities, many of them truly enormous. The map of the growth to come (much of it in Asia) was but one of the alarming pictures presented.

In the last week it has again become clear that a 2 degree rise in global temperature is pretty much a certainty, and something that will be upon us within 20 years. The trend will continue because the predatory economy continues to snatch hydrocarbons from the ground and pump out polluting greenhouse gases. The optimism of the renewables lobby, the circular economy people, and the green growth Mafia is belied by a sober analysis of the dematerialisation problem: the only solution is to reduce energy use radically, and quickly. Renewables and recycling have their part to play, but the need for a complete paradigm shift is inescapable. Meanwhile, the allegedly 14th most sustainable city, Manchester (yes we are in trouble globally!), continues with its aviation dependency, and its obsession with China’s growth, as if that will secure a liveable future for our citizens, or respond to the massive social deprivation of the city’s neighbourhoods. The contradiction was noted in passing by Jon.

But what would a paradigm shift look like?

We have set that out in some detail in our interventions In Place of Growth and The Viable Economy. We are not alone, and groups like Localise West Midlands, and the more strategic Transition Towns groups, are presenting similar arguments. But are we tinkering at the edges when what’s needed is a massive shift in the way we live, and with little time to make it? With each day that passes, carbon emissions accumulate in the atmosphere, and they’ll be there for very many years to come.

Some of the best thinking on the paradigm shift is coming from the Degrowth movement and their recent book Degrowth: A Vocabulary for a New Era explains this in a series of short essays, a kind of keywords for ecological, social and economic justice. Degrowth rejects the illusion of growth – effectively changing the conversation , while at the same time (unlike North American Steady State Economics, which which it has an affinity) re-politicising the public debate that has been captured, colonised by economic rationalism (efficiency, productivity, growth….). It is both a scholarly discipline with its academic economists and social scientists, but it is also a social movement that connects to people’s grass-roots responses to the economic and ecological crisis.

Degrowth looks very much like the new paradigm that we need to respond to the urban-globalisation nexus. It doesn’t have all the answers, but then what approach does? It is our best bet, as a dynamic and evolving approach to finding a path through the increasingly stony terrain ahead of us.

Mark H Burton

Steady State Manchester collective

Payday lending and the need for community banking

payday windowCarl Packham, a writer on the growth of payday lending introduced a discussion on Wednesday under the auspices of Manchester’s Social Action Research Foundation (SARF)

Ironically Carl’s recent book (“Payday Lending: Global Growth of the High­‐Cost Credit Market”) costs £45, although it will soon be available as a paperback. Not that I can talk, another forthcoming book on debt in which I have a chapter will cost more (although it is longer). Knowledge (power) is kept out of the hands of the indebted by the global publishing industry.

Carl laid out the basic facts. The growth of payday lending – readily available, unsecured, high interest lending to people who are not “good risks” – can be attributed to a conjuncture of the following:

  • deregulation of the finance industry

  • falling incomes and increase in financial distress and insecurity

  • the curtailment of emergency finance from the welfare system

  • the clamp-down on state benefits, including the use of sanctions and the bedroom tax.

The payday lending “industry” has grown greatly in the last decade, and a critical feature has been the arrival of US firms, seeking new markets and targeting what was described as poor neighbourhoods that would never see a tourist.

A number of key points emerged both from the talk and the ensuing discussion:

  • People who take payday loans mostly use them for meeting ordinary everyday expenses.

  • Popular stereotypes about people taking loans, as irresponsible and profligate, have no basis. Indeed as Mike Wild pointed out, the jibe that they are used to buy “flat screen t.v.’s” and smartphones ignores that t.v. (all flat screen now) is a cheap source of entertainment and smartphones are an effective way of accessing internet-based services, applying for jobs (hence avoiding benefit sanctions).

  • Credit unions could be an alternative, but a) they don’t have the capacity, b) they can’t compete with payday lenders on speed of loan, and c) they actually try to encourage people to limit borrowing and find alternatives. They also have their interest rates capped – a good thing but that means they can’t easily expand.

Steady State Manchester, in our In Place of Growth paper of 2012, called for initiatives in this region bringing together the need for affordable credit (for people in financial distress as well as for small and green enterprises), the need for a safe, ethical home for local people’s savings, and the need for investment in the replacement economy of re-localised, prosperity re-circulating, and environment-friendly business initiatives. That need has not gone away, yet there is a general lack of imagination and a lack of political will to forge something like that – authentic locally focussed stakeholder or community banks that service our communities, building genuine prosperity. The New Economic Foundation‘s (and Justin Welby‘s) proposal on the Royal Bank of Scotland suggests one way this could be brought into being. They suggest that this 84% government owned bank (with a notoriously bad ethical reputation) should be broken up into publicly owned (but independently governed) local banks that, like the German Sparkassen, service the local economy (see also this report from New Weather Institute). Adding the mandate to provide responsible and affordable credit to help people deal with the fluctuations in their incomes and outgoings (and get out of long term debt) would be a feasible addition that could help put an end to the highly profitable, predatory Wongas and their ilk.

Other things are needed, and as Johnna Montgomerie and colleagues note in their excellent report, “The Politics of Indebtedness in the UK” (to which Carl Packham contributed), household debt restructuring is The missing piece of the financial restructuring puzzle (for a summary of the argument see this blog post). As Carl Packham noted, this is just what the government of Croatia is doing, writing off the debts of those below the poverty line, while the new Syriza government of Greece plans something similar, in tandem with its more well-known external work to restructure the country’s external debt.

Mark H Burton

Steady State Manchester collective

The Viable Economy serialised – About Work and Income.

We continue the serialisation of our intervention, The Viable Economy, this time with just one section, on Work and Income.  You can download the whole pamphlet as a pdf file, here.
If you like it, why not make a donation towards our work. Our costs are modest, but we are unfunded.

9) About work and income.

The problem

The unviable economy is not a good place to work and nor is it a good place to not work1. On the one hand decreasing numbers of people work in high pressure, highly skilled jobs, administering the increasingly irrational system. On the other hand there are those who would like to, and could do paid work, but who cannot get employment, or who are under-employed. In between there are the armies of those with poor pay and conditions, the working poor. As automation and productivity increase then more and more people become surplus to the system’s requirements, their work, at best, becoming more routinised, their employment and income becoming more precarious, or at worst they join the ranks off the long-term unemployed. This pattern is what we have in our region, and it is what characterises the global system. In all places there is the co-existence of modern, technology-based forms of work and exploitation, with more brutal patterns of exploitation (including people-trafficking and forced labour, zero-hours contracts, outsourcing and home-working)2. Meanwhile, unwaged work, chiefly of women in nurturing and caring, subsidises the system as it extracts profit3.

As this system has become entrenched pay differentials have become much more unequal, while out of work benefits have become meaner and ever more conditional. At the same time a constant drone of political rhetoric about ‘hard-working families’ demonises those who do not have the capacity or opportunity for paid work.

The viable alternative

In the viable economy, work both paid and unpaid fulfils a purpose while its duties and benefits are shared. Remuneration for satisfying, interesting work is at a reasonable level and while incentives and rewards exist, they are at modest levels. People who are not able to do paid work, or for whom there is no paid work are paid a reasonable wage with obligations to contribute to the community or environmental goals. The viable economy, then, implies a shift of emphasis from pointless work for private profit to meaningful work for public good for all types of work whether paid or unpaid.

Some viable policy ideas

  • Promote the Living Wage with the goal of participation by all large employers, public and quasi-public sector organisations and all their suppliers and contractors.

  • Establish a common basis for establishing the benefits of work experience whether in or beyond formal employment via a straightforward regional personal development portfolio for lifelong learning and community contribution for all people whether in or out of work. Encourage participation by colleges, large employers, the public sector and those under contract to them, and from community based organisations.

  • Prioritise investment in labour-intense industry and decent jobs, recognising that there is a trade-off between availability of jobs, on the one hand, and the need to improve work-life balance and reduce overall working hours on the other.

  • Campaign for fiscal autonomy for the region and use it to trial a citizens’ income. Beyond this, campaign for introduction of an emissions cap and share framework as a redistributive and ecological strategy4.

  • Campaign for an overall reduction in working hours, thereby releasing employment for those that want it and increasing the potential for employed people to undertake unpaid work in the home and community. This could lead to firstly, the reduction of hours worked over contract, whether paid or unpaid, for example by ending opt-outs from the Working time Directive, backed by a Living Wage to reduce the need for low-paid people to work long hours, and secondly, the overall reduction towards a 21 hour working week5.

  • A reduction in working hours (together with the approach to investment discussed in section 7) could also help combat the upward rise in retirement age, with a balanced approach to contribution and income over the life-span.

1By work we include waged and unwaged work.

2Grosfoguel, R. (2008). Transmodernity, border thinking, and global coloniality: decolonizing political economy and postcolonial studies. Eurozine. http://bit.ly/1syxC3M

3Mies, M., & Bennholdt-Thomsen, V. (1999). The subsistence perspective : beyond the globalized economy. London: Zed Books.

4See note 30

5“Twenty-one hours is close to the average that people of working age in Britain spend in paid work and just a little more than the average spent in unpaid work.” New Economics Foundation http://www.neweconomics.org/publications/entry/21-hours

The Viable Economy serialised – About investment, money, credit and debt.

We continue the serialisation of our intervention, The Viable Economy, this time with just one section, on investment, money, credit and debt. You can download the whole pamphlet as a pdf file, here.
If you like it, why not make a donation towards our work. Our costs are modest, but we are unfunded.

7) About investment, money, credit and debt.

The problem

Investment is crucial to the way economies develop over time; we invest funds today in order to build up the sources of future prosperity.

The way in which investment functions, to which enterprises it goes and what activities it supports, determines the type of economy we will have.

Currently, dominant thinking about investment neither reflects the realities of the money system nor the use of the surplus produced by the economy. This has some practical consequences.

1) In order to attract external investment into both the national and regional economies: whilst wages are driven down ‘to compete with cheap labour economies’, there is an effort to increase the skills of the workforce. The first contributes to declining real incomes and thereby to the increase in personal debt while the second instrumentalises and narrows education so it solely serves economic interests, thereby destroying it.

2) Meanwhile, the real, productive economy is unattractive to investors, and profits are misdirected to speculative, unproductive activities such as betting on the financial markets or property price inflation both in the UK and internationally.

3) And both government and the banks ignore the potential that the creation of money (“out of thin air”) has for sourcing investment in socially and ecologically desirable programmes that could also, if properly controlled, maintain prosperity in a post-growth economy. Indeed, “Modern Money Theory”, which we draw on here, suggests that austerity is unnecessary1.

Investment in the unviable economy, then, is a process which fails to address the costs we are imposing on the future and thus undermines future prosperity rather than nurturing it. The unviable financial investment infrastructure is a de-personalised system of profit maximization which results overwhelmingly in the transfer of wealth to financiers and the wealthy through the uneconomic processes of rent extraction and ecological asset liquidation. It fails on the three criteria of economic, social and ecological viability.

The viable alternative

In the viable economy, investment comes predominantly from the following internal or endogenous2 sources:

  • surplus generated in non-exploitative ways by the local economy, including savings

  • fiat money created by public and private banks, under strict rules and regulation3

  • government-created money, as in the proposals from the New Green Deal Group for strategic, or “green quantitative easing”4. Although our view is that this needs to be within the “envelope” of the permissible size of economy dictated by ecological reality.

  • a share of the profits of industries operating in the economy, that rather than seeping out is, by agreement, utilised locally as what colleagues at CRESC call the ‘social franchise’5, a pay-back to the community that hosts and pays for the enterprise.

  • Tax revenues, or related funding streams, such as that envisaged under the ‘cap and share’ proposals6.

The viable economy will require financial intermediaries for savings and investments which do not starve communities of the affordable finance they need to invest in their futures. The monolithic and brittle ‘too big to fail’ banking system needs to be radically diversified for a resilient and viable economy. Public municipal banks with a regional remit to support their areas can help direct investment towards the basis of social and ecological prosperity.

In an ecologically viable economy returns to investors must be more modest and the cost of credit fair and reasonable.

Some viable policy ideas

  • Greater diversity in the banking system with an emphasis on locally responsive and responsible institutions that provide local vehicles for savings and investment.

  • Adoption of the principle of endogenous development to guide investment seeking and decisions.

  • Public investment in the local economy and in energy transition.

  • Private firms to be ‘called in’ to negotiate social franchise deals as a condition for favourable environment for their operations locally.

  • Attraction of foreign investment should not trump local interests.

  • The development of local currencies such as energy-backed currency as part and parcel of the ‘plugging the leaks’ and endogenous investment strategies.

  • Campaign for revenue raising powers for local/regional government.

1e.g. Cato, M. S. (2014). Can’t Pay, Won’t Pay: Debt, the Myth of Austerity and the Failure of Green Investment. In J. Blewitt & R. Cunningham (Eds.), “The Post-Growth Project: How the End of Economic Growth Could Bring a Fairer and Happier Society.” London: London Publishing Partnership. http://bit.ly/1B0dIb4 and Guinan, J. (2014). Modern money and the escape from austerity. Renewal, 22(3-4), 6–21. http://bit.ly/1xGKVm5 . While such creation of money could lead to other problems such as inflation, there are other levers available to government to manage that risk. See Lawn, P. (2010). Facilitating the transition to a steady-state economy: Some macroeconomic fundamentals. Ecological Economics, 69(5), 931–936. doi:10.1016/j.ecolecon.2009.12.013

  • 3The control over the creation of fiat (bank-created) money is essentially a public utility with a transformative potential. It could be a powerful tool in the transition to an ecologically viable economy. Some campaigners and commentators (e.g. Positive Money) suggest that private banks should be required to hold full reserves i.e. lend on the basis of deposits only, and the central bank can control the money supply directly, printing new money and granting it to public revenue for the elected government to spend in accordance with democratically elected priorities, that is social use value. We are agnostic on this idea, which has been criticised as not reflecting the reality of bank-money since its inception, unlikely to be implemented and potentially stifling of the stimulus needed for necessary investment for social and ecological benefit.

Building economic resilience in Buxton

Now out is the  BUXTON ECONOMIC RESILIENCE STUDYSteady State Manchester contributed to the initial workshop that launched this work, and we are delighted to see the publication of the report.  It is well researched and data-based.  It also makes use of our Viable Economy formulation.
Transition Buxton, the publishers of the report say:
“The Economic Resilience Study was a follow on from the Alternative Economics Seminar in November 2013, and took most of 2014 to research and produce. It is an in-depth analysis of our local economy, based on a combination of publicly available statistical information, private data and surveys of residents, visitors and local businesses. It identifies a range of actions that will enable us to build a more resilient community that respects the environment, on which we all depend.

We have undertaken this work with the aim of enabling and supporting local individuals, businesses and organisations to take actions that strengthen our economic resilience and wellbeing.

The report identifies opportunities to create more jobs, grow new enterprises and help existing businesses to thrive in a more resilient and buoyant community.

Findings in the report include:

  • Buxton households spend over £30m each year on food and drink, but only 1% of this is spent in local independent shops. Just a 10% increase in local food sourcing would result in an increase of over £800,000 flowing into the local economy per annum.
  • Buxton households spend around £12m each year on energy in their homes. Investing in improving the energy efficiency of just 1% of the domestic buildings in the town each year would result in an increase of £300,000 flowing into the local economy annually and would also reduce our energy needs by around £60,000 per annum.
  • The introduction of renewable energy generation into just 35 houses in Buxton each year would contribute a further £250,000 to local businesses per annum and benefit householders through savings and income by £65,000 a year. In addition a community renewable energy hydro project could generate £35,000 p.a. through the feed-in-tariff and generate enough electricity for 50 homes.

Please download, read, share and use the data in the report and appendices, all freely available on our website at this link: http://transitionbuxton.co.uk/node/577