The quality and inclusiveness of economic growth is strongly related to the quality and inclusiveness of our democratic institutions.
The persistence of economic insecurity and disadvantage, coupled with a record of weak political and institutional responses, risks undermining the democratic foundations upon which the social contract between citizens, the state and the market is built. Inclusive growth provides an opportunity to look at these challenges in a new way.
Mike Emmerich recently wrote powerfully about the failure of policymakers to support post-industrial communities that have been locked out of growth for generations. Politicians and economists have long recognised the impact of the decline of traditional industries, but have done precious little to address it. Welfare reforms such as tax credits have prevented things getting worse, at significant and growing expense to the public purse, but they have not addressed this post-industrial malaise. Many of the neighbourhoods that were the poorest prior to significant investment in area-based initiatives are still the poorest today. A look over the Atlantic suggests that the consequences could be dire for our society and democracy.
In an alarming study, economists Anne Case and Angus Deaton identified a significant spike in suicide amongst white Americans between 1998 and 2013, particularly those that were the least educated. The rise was so severe for whites aged 45 to 54, that they experienced a reversal in the almost universal trend towards increased life expectancy. Part of the explanation lies in the decline of manufacturing employment, the growth of the knowledge-based economy and a sharp reduction in the proportion of secure and higher-paying jobs available to the less educated. This has been coupled with a weakening of collective bargaining, the growth of neoliberal economic values (such as individualism and the belief that economic insecurity drives competition and innovation) and a greater exposure to financial risk and insecure employment. This has, in turn, helped fuelled a deep disenfranchisement in the United States, great social upheaval and polarisation, and the rise of fringe political forces that have found a way to tap into the anxieties of communities who have long been ignored.
The UK has avoided the scale of inequality present in America, but our own post-industrial communities have experienced similar forms of disenfranchisement. It is no coincidence that Labour – traditionally the party of the working class (and white working class) – is at risk of serious decline in many of its strongholds in the North. This reflects a wider failure of our democratic system to respond to the social fissures and reconfigurations brought about by decades of economic and financial liberalisation. It is true, as Neil McInroy has argued, that the dominant economic narrative of our time – that cities should pursue agglomeration and become magnets for high-skilled workers and high-value firms – does not on its own have an answer for those at the margins of our market economies.
There is a risk that devolution reinforces these polarising trends in society if local leaders see their primary job as the management of functional economies and the pursuit of sustainable public finances. The technocratic business of devolution should not overshadow what is its core challenge: to give more people a bigger stake in the economy, and greater influence over the institutions that impact their lives. Bold proposals such as the basic income and the democratisation and local retention of wealth provide potential long term solutions. But the most urgent task is to reinvigorate our democracy so that those that have long lost out from economic growth, and the organisations that support or represent them, are able to directly shape and influence how we govern our economies and political institutions. Rebalancing the UK’s economy is as much about creating a new sense of belonging and citizenship as it is about growth and productivity.
Atif Shafique is lead researcher for the RSA Inclusive Growth Commission. You can find him on Twitter @Atif_Shafique.