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To the barricades

November 15, 2013 by · 3 Comments
Filed under: Credit crunch, Politics, The RSA 

In his fascinating and highly readable book ‘The Confidence Trap’ David Runciman explores the complex relationship between crisis and democracy, a subject which features heavily in Alexis de Tocqueville’s classic studies of early 19th century American democracy.

Tocqueville’s paradox – with which Runciman concurs – is that democracies need crises to throw them out of the torpor, complacency and self-indulgence to which they are prone, yet democracies are not very good at managing crises. Indeed, it is often at moments of crisis that the support increases for a more authoritarian or charismatic form of authority.  Tocqueville surmised that because it takes democracies time to get their act together they need crises that endure, even though the longer a crisis lasts, the more danger there is of very bad things happening.

This is neither a simple nor an easy message. It is a however a useful perspective from which to consider the plight of many English local authorities. Unless the Coalition changes course, councils are facing unprecedented levels of cuts. Not only are virtually all non-statutory services at risk but local authorities of all political complexions are claiming they may soon not even be able to obey the law. This is a Tocquevillian crisis: deep, real and extended.

In the breast beating and soul searching taking place as local authorities face the ‘jaws of doom’ of growing need and falling income, lots of concepts and schemes fight for attention: community budgets, service transformation and demand management are all seen as ways of responding. The RSA’s own research with local authorities suggests that a serious focus on demand management leads directly to wider questions about values, the purpose and form of public services and the expectations, capacities and aspirations of citizens.

In such dire circumstances the imperatives of leadership, ethics and organisational change align. The local authority needs to show the crisis is real (not easy given previous wolf-calling tendencies), to show that it can act accordingly (even harder), and inspire others – including local citizens – also to rise to the challenge (hardest of all). There may be different ways of doing this but perhaps the most obvious and powerful is for council rulers to be seen to put aside their own personal, political and organisational interests in the face of the dire needs of the locality.

Local government was to a significant degree created by concerned citizens needing a vehicle to pursue the shared goals of municipal renewal and modernisation, but has since became an often alienated and alienating bundle of political, professional and bureaucratic interests. Arguably, councils have no choice now but to throw themselves back on their citizenry, to offer to deconstruct themselves into whatever form will best meet the exigencies of the moment.

We are used to the idea that the problem of public administration is less of conception than of execution., less of policy making, more of delivery: not in this potentially revolutionary moment. What matters now is the courage and imagination to abandon all pretence of being able to manage or resist and instead to commit to two acts of profound leadership, first to hand the crisis back to civil society, second to promise to lead whatever strategy then emerges. The consequences are unpredictable but any council that embarks fully on such a journey is likely to end it reduced in size but enhanced in authority, with less power but with more influence.

For councils to take this route of risk and short term self-sacrifice may be seen as their duty but it may also be the only way to fight back. Some authorities – both Labour and Conservative – are responding to the crisis by demanding or begging for mercy from the centre. At the moment the local citizenry may be sympathetic but it is unlikely to be moved. But when councils have put their bodies on the line and when even the most concerted efforts of united communities are seen not to be enough to protect basic services then the public will need little prompting to express its rage.

Many have seen great significance in David Cameron’s speech to the Lord Mayor’s Banquet a few days ago. By describing his purpose not simply as cutting the deficit but creating a ‘leaner more efficient state’ that delivers ‘better results for taxpayers’ the Prime Minister was seen to change the purpose of austerity from unfortunate necessity to deliberate political project. With the economy growing and reasonable levels of support for austerity persisting among key swing voters this shift in rhetoric may delight the true believers without seeming too much of a risk. But if the tide turns in our cities and counties then the idea that what is being endured has any other motive than absolute necessity could prove highly inflammatory.

Over the next twelve months in both the health service and local government austerity will really bite. The depth of this crisis and the ways in which central and local leaders respond are imponderables but my hunch is that some crunch moments for national and local democracy lie ahead.








Mark Carney – the backlash starts here?

November 6, 2013 by · 4 Comments
Filed under: Credit crunch, Public policy 

To start a fashion you have to be willing to look ridiculous. So here goes. I think Mark Carney (yes, the man who has single-handedly saved the UK economy just by taking up his job) made a rather superficial speech a couple of weeks ago.

I can’t pretend even to understand every word of the offending oration. In parts it is quite a technical account of the things that are happening and need to happen in order to provide a firm foundation for the UK to continue to be a global centre for financial services.

Indeed, in his speech the Governor of the Bank of England goes further than the search for stability. He told a Financial Times event to mark the paper’s 125th anniversary:

Suppose, for example, that UK-owned banks’ share of global banking activity remains the same and that financial deepening in foreign economies increases in line with historical norms. By 2050, UK banks’ assets could exceed nine times GDP, and that is to say nothing of the potentially rapid growth of foreign banking and shadow banking based in London. 

For Carney the benefits of such a growth are obvious:

… if organised properly, a vibrant financial sector brings substantial benefits. Today financial services account for a tenth of UK GDP and are the source of over 1 million jobs.

Two thirds of those are outside London…. Being at the heart of the global financial system also broadens the investment opportunities for the institutions that look after British savings, and reinforces the ability of UK manufacturing and creative industries to compete globally. Not to mention that financial services represent one of the UK’s largest exports.

More broadly, London’s markets serve a vital global role. London acts as Europe’s window to global capital; is a centre of emerging market finance; and can play an important role in the financial opening of China.

Carney thus rejects both the prioritisation and implicit trade-off contained in Peter Mandelson’s assertion post credit crunch that we need ‘less financial engineering and more real engineering’. The Bank of England Governor believes that a dynamic and growing financial services sector is perfectly compatible with one which behaves responsibly.

These two brilliant articles by John Lanchester offer an alternative view of things

Lanchester’s pieces were written in the summer but still there is a steady flow of new scandals. Indeed, as he argues, the big question – given the terrible impact on so many people of the banks’ behaviour – is how the public has become insouciant in the face of ever more evidence of venality and incompetence at the very heart of finance capitalism. In a sane world the recent rate swap scandal would be a cause celebre but so inured have we become that it has only bubbled under as a story. Every week it seems there are now allegations about rogue traders such as last week’s about currency speculation.

On a more systemic level much of the activity that makes the world of financial capitalism go round and which makes millionaires of its most accomplished practitioners is of questionable value. According to a recent World Development Movement report speculation on food prices by the world’s largest investment bank increased global food prices over the last decade while generating more than £2 billion in rent seeking profits for the banks.

There are two questions to which I would need to hear satisfactory layman’s answers before I could feel the faintest enthusiasm for Mark Carney’s vision of a UK economy even more reliant on global financial capitalism.

First, what is the evidence that all this activity – particularly that in the so called ‘shadow banking’ sector – actually contributes to improving the lives of the world’s citizens, particularly its most disadvantaged? This is partly an ethical question but also one about national interest; to be dependent on a category of activity of minimal substantive value must be risky.

Second, is it really – as Carney asserts – possible to have a dynamic, speculative, financial capitalist sector that also behaves responsibly and consumes its own risks?

Arguably, the high flyers of finance capitalism are as obsessed with making money as sex addicts are with having sex. We wouldn’t expect a sex addict to be very good at fidelity or treating other people (particularly the objects of their desire) respectfully. So why would we expect financial speculators ever to be much good at behaving responsibly or in anyone’s interest than their own? The reason regulation in this sector has such a poor record is that those who run it have an obsessive drive to circumvent anything which gets in the way of money making.

In offering us a future of powerful, but also responsible and effectively regulated, finance capitalism dominating the UK economy isn’t Mr Carney ignoring history and putting hope above expectation?



Delayed reaction

September 25, 2013 by · 3 Comments
Filed under: Credit crunch, Politics 

In a mixed LRB review of Christian Caryl’s book ‘Strange Rebels: 1979 and the birth of the 21st century’, David Runciman makes a point about the circuitous route of change:

‘The world that fell apart at the end of the 1970s had begun to unravel much earlier in the decade, in the succession of crises that included the demise of Bretton Woods, the Arab-Israeli war, the subsequent oil shocks and a world wide recession. That confused and confusing period turned out to be the dawn of neoliberalism, though it wasn’t until much later that it became clear what had happened’.  

He goes on to say

‘Now that neoliberal order is stumbling through its own succession of crises. We are barely five years into the unravelling, if that is what is taking place’.

This analysis sheds some historical light on whether Ed Miliband’s return to statist social democracy will prove to be a wise move.

There are two core assertions lying behind the Miliband programme: the first is that capitalism needs to be rebalanced from big business to small, from producer to consumer and from shareholder to worker. The second – implicitly – is that in a global competitive economy this rebalancing can be achieved by the state without major malign side effects.

The first assertion is the easier to sustain, indeed would be shared by people across the political spectrum. In many ways big business has not come up with the goods;  in investment, responsible tax payment, resource use, fair remuneration. In key sectors – most notably finance, energy and water – it is clear there has been systemic  ‘rent seeking’ (using market position to make money without adding value).

Whether the failings of big capitalism are enough to overcome public scepticism about the state, about Labour and about its leader is another matter, but here again it is worth quoting Runciman on the origins of neoliberal political hegemony:

‘The real story of the late 1970s in the democratic West is that people were tired of political and industrial strife and were willing to try something different, however uncomfortable. It wasn’t a revolution: more a collective shrug’

If we replace 1970s with 2010s and the words ‘political and industrial strife’ with ‘falling living standards and high unemployment’ the case can be made that while only a minority of voters share the enthusiasm of the left for Miliband’s speech, it might yet prove to be a successful gamble. Certainly, the Conservatives now face the challenge of attacking Labour’s policies without looking like they are defending unpopular corporate interests.

It is one of our many cognitive frailties that we tend to focus on unusual events rather than recognising longer term trends. The credit crunch and the resulting economic crisis was, of course, critical but the underlying trend is the thirty year neoliberal experiment in the West running out of road, assailed by its own internal tensions and populist critiques from both the right and left.

Whatever his other failings, Labour’s leader is not unrealistic: he does not think he can single handedly move the centre of political gravity to the left. Instead – and this realistically is all the boldness we can hope for from democratic politicians – he has made a judgment about where the future centre might be and taken the gamble to go there ahead of the electorate (and most of the media).

Whether or not it succeeds, this was then a historically significant speech. However, the pleasure that Miliband’s team gets from reading the reaction of the left may need to be qualified by a final extract from David Runciman:

‘What we are waiting for is a counter-counter revolution, led by progressives who have learnt the lessons from the age of neoliberalism and are unafraid to use its instruments to overthrow them….Someone will get there in the end and maybe by the end of the decade…..but it is unlikely to be anyone near a position of power right now’.



The quiet revolution that could help build a new economy

August 2, 2013 by · Leave a Comment
Filed under: Credit crunch, Politics, Public policy 

There is an excellent article by Jenni Russell in this morning’s Times . Drawing on the powerful research of the Resolution Foundation she shows recovery is unlikely to address the divide between the rich, on the one hand, and poor and struggling middle families on the other. Indeed, such is the continuing scale of indebtedness of British households that a recovery which led to rising inflation and interest rates could be catastrophic for millions of people who are currently only just able to pay rock bottom interest rates.

Given both the weak fundamentals of the British economy and the role being played in the recovery by a mini housing boom deliberately engineered by the Government, it is easy to conclude that the debate about new economic models which was precipitated by the 2008 crash has proved to be insignificant. There are multiple imbalances in the economy – geographical, industrial, social – but seemingly the only one really taken seriously by Coalition is that it perceives between the respective sizes of the public and private sectors (not that it is yet having much impact here either). In making (and winning) the case for public sector austerity, the Government makes much of its commitment to the long term yet it is pretty clear that ideas of building the foundations of a new economy have – even if they were ever taken seriously – been replaced by the mantra ‘any growth is good growth’.

As part of a broadcasting project, I have in the last few days been focusing on economic strategy in cities, and particularly city regions. Indeed, the Government deserves credit for having generated – through the establishment of LEPs and various national funding pots – the emergence of bottom-up movement towards city region collaboration. Greater Manchester’s combined authority of ten urban councils is the pioneer but plans are now advanced for city regions around Leeds, Liverpool, Sheffield and even in the traditionally parochial North East.

The perspective of these city regions is both more inclusive and strategic. Yes, they want growth but it has to be growth for the long term, which generates jobs and which holds out the prospect of rising living standards across the locality. As Bruce Katz and Jennifer Bradley from the Brookings Institute argue, cites have learnt the lesson of the crash. The focus is no longer so much on a consumption based model of regeneration (city centre apartments, sports stadiums and shopping malls) and more on seeking to identify, develop and exploit productive capacity. There is, for example, interest in evidence suggesting that investment in activity which leads to exports from cities has significantly greater benign spill over effects than activities which are either circulating money round the local economy or – as in the case of spending in international retail chains – removing money from the economy.

Criticising Government policy in one paragraph and praising it in the other is not simply a sign of my inconsistency it reflects a strange dualism. While at national level the economic debate feels polarised, predictable and short-termist, and while certain ministers continue ritually to trash local authorities, key parts of the Coalition (the Cabinet Office, the Treasury and BIS) are working pretty effectively with predominantly Labour councils to start to develop ambitious local economic strategies. Similarly, while the list of newly created peers might seem to emphasise the way national business interests line up with the Conservatives, at the city region/LEP level Labour Councils and the private sector are trying hard to work together to develop and pursue economic revival.

There have been many previously unsuccessful attempts to create effective regional and sub-regional economic governance in England, and we still remain just about the most centralised system in the developed world. However, my sense is that this time may be different. There are many reason for this including the role of key figures such as Lord Heseltine and ‘core city’ leaders like Manchester’s Richard Lees, but the most important is that when it comes to the two biggest challenges we face – sustainable and inclusive economic growth and affordable public services –the city region is simply much more likely than the nation state to be the place where integrated, and imaginative solutions can emerge.

This may be the beginning of a quiet and long overdue revolution in economic and wider policy making. But given that neither Ed Balls nor George Osborne will win plaudits in their parties by talking up nationally sponsored, locally designed public private corporatism don’t expect local pragmatism to be echoed in national debate any time soon.


From bleeding stump to bleeding edge?

July 3, 2013 by · 5 Comments
Filed under: Credit crunch, The RSA 

A few recent conversations – including our recent RSA/Arts Council seminar series and a chat with Janet Morris, who is involved in the What Next? Southwark initiative among arts organisations – have coalesced in my thoughts.

The settlement for arts and heritage funding in the recent spending review could have been worse but not much worse. Even deeper reductions in local government funding (plus more years of council tax freeze) will mean local cuts for arts organisations on top of national ones.

While some local authorities – Bristol and Norwich, for example – see arts and culture as integral to their local economic strategy, beyond the small band of true believers can a case be made for the arts which goes beyond the passionate special pleading which we have heard so often? I think it can, but it will involve a major shift of thinking in the arts sector itself.

Looking at overall cuts in council spending of up to a third, alongside rising needs and a sluggish economy, it is clear that unless local leaders think and act very differently, they face managing a major decline in both service standards and the quality of the public domain.

The new form of local leadership required involves a number of elements:

–          The development and articulation of an ambitious, distinctive and achievable vision.

–          The bringing together of the key local actors from the public, private, civic and third sector and the inculcation of a deep and authentic commitment to collaboration (which, to mean anything, must involve a willingness to make short term sacrifices in individual organisations in pursuit of shared goals).

–          A rich engagement with the broader public, including identifying and winning buy in for actions local citizens can contribute to the place’s prospects (for an example of this see the Mayor of Oklahoma).

‘Vision’, ‘collaboration’ and ‘public engagement’ are all the kind of warm words that tend to get attached to various local coordinating bodies, like, for example, the Local Strategic Partnerships set up by the last Labour Government. But the harsh reality is that these bodies tend to be little more than committees which organisations either treat with disdain or through which they steadfastly pursue their own bureaucratic self-interest.

How can rhetorical commitments to new forms of leadership, innovative practice and generous collaboration turn into something real? This is where arts organisations can come in. Their ethos, their method, their creativity can act as the catalyst for new ways of being and thinking. This is something we saw happen when we helped bring arts practice and method to the local coordination body in Peterborough as part of our Citizen Power project (final report forthcoming).

The question thus changes: instead of ‘how can we persuade the authorities (and local people) to protect the arts in tough times?’ it becomes ‘how can we be prime movers in enabling our place not only to survive but to prosper in these difficult times?’.

For arts organisations to make this offer and make it credibly they will need to examine their own ways of working. They will in essence need to see themselves as commissioned by the places, in which they are based, a concept which, if taken seriously, is complex and challenging.

To act as place catalysts will involve developing a nuanced and grounded understanding of their locality, its people, its needs and its challenges. It will mean fending off those – and this will include some of its traditional allies – who see such an idea as instrumental or parochial. And it will involve the organisations showing how successful engagement in place leadership depends on being able also to create art and culture of intrinsic merit.

I suspect many arts organisations would claim already to be catalysts for local change just as many organisations claim to subsume their interest to the broader good of their locality, but such claims are hollow unless they are manifested in a genuine commitment to self-examination and reorientation.

It won’t be easy but ‘place commissioning’ may be the way for the local case for arts funding to be less bleeding stump and more bleeding edge.





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