Tag Archives: economy

Cross-Party consensus and other ‘escape hatches’

27 Nov

It may not have been the first such example but the pre-2015 election consensus around long-term infrastructure planning was certainly a ‘learning moment’ for Westminster. The lessons have not been lost – despite the divisiveness of ongoing policy power struggles.

The case for removing infrastructure from knockabout political games was, eventually, grasped by Party leaders despite their decades of devotion to partisan debate. Endless arguments and prevarications get in the way of well-considered solution investment whilst the people, emulating Doogle, shake their heads sorrowfully and mutter ‘What a way to run a railway’.

Even building that infrastructure consensus was hard fought. Never mind that the life cycle of governments was far too short for serious investment. Never mind that the lobbyists were routinely exposed as short-term market manipulators. Never mind that the complexities of major projects didn’t fit into 78pt tabloid headlines. It was no small wonder that anything was ever achieved in the febrile atmosphere of Westminster party politics.

But opening an escape hatch requires broad recognition of some impending disaster.

With today’s launch of the White Paper on Industrial Strategy it is timely to review the Green paper comments from industry and academia. The Policy Lab led by Kings College London (KCL) observed, ‘It is difficult to sell a big change to the entire country without a sense of crisis’ and went on to ask whether ‘a burning platform exists to launch the industrial strategy from?’

Last week’s budget scene-setter strived to embed ‘productivity’ as a central motivating focus but was that sufficient to establish a ‘war footing’?   The KCL input was as positive as possible – suggesting unity around securing a ‘peace dividend’ ‘as the country moves through this time of profound change and heightened disruption’.   They didn’t dare suggest that Brexit was itself a sufficiently severe and imminent unifying threat – a diplomatic caution that serves to underline the long road between rhetoric and reality.

Getting consensus around infrastructure planning set the scene for further calls to remove contentious arenas from everyday politics.  Writing in the December issue of Prospect magazine, Diane Coyle’s candidate for cross-party consensus is Economic Strategy.

Writing as a member of the independent Industrial Strategy Commission, Diane concludes that, There must be a commitment, across party lines, to strategic management of the economy, monitored by an independent body analogous to the OBR. The strategy must go far beyond a few eye-catching sector deals and be aimed at long-term challenges, such as decarbonising the economy and delivering health and social care for an ageing population’.

That plea for cross-party consensus was echoed again last week when 90 MPs repeated calls for removal of the Social Care/NHS policy complex from the political maelstrom. The BBC reported, The letter argued that only a cross-party NHS and social care convention – a forum for non-partisan debate – could deliver a sustainable settlement for these services where conventional politics had failed to do so.’

What may have started with independence for the Bank of England and the creation of the Office for Budgetary Responsibilities and a seemingly endless list of ‘arms-length’/independent regulators seems now to have become the model for a new hands-off school of government.

That withdrawal, however, is a prospect that now seems far more likely to succeed at a local level closer to the people and their communities. An alternative ‘escape hatch’ for conflicted macro-managers is to back-off and devolve issues to regional/metro and local governments where attending to the great diversity of needs can help untangle the centrally knotted issues. The other great advantage of letting go is that local political discourse is far more inclined towards the consensual and the emergent White Paper is certainly not short of placed-based aspirations.

The UK is, arguably, the most centralised of all advanced economies. Sadly, subsidiarity is often and erroneously painted as some dark and suspect EU concept but as any parent with teenagers will know, there comes a time when youngsters must be let go. So it is with Mrs and Mr Whitehall – the offspring must be trusted to provide the energy for the entire family’s next generation.

And I wrote all that without using the F word.

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Communities and their place-makers: the roots of the UK economy

20 Oct

The London-based Centre for Cities does exactly what it says on the tin. They advocate for better recognition of the economic and societal strengths of the UK’s major conurbations.

‘Cities’ according the Centre for Cities, ‘do not follow the national economy – they ARE the national economy’ – and their diversity demands that each of them have different priorities to meet the needs of their citizen and business communities.

This diversity of needs and priorities stands in sharp contrast to Whitehall’s grasp of the economy. The UK is, measurably, the most centralised of all developed nations.

Even with limited sub-national devolutions beyond England and the cautious local empowerment of Metro Mayors and City Deals within, it is clear that in so many spheres of our regulated regime, we have a complex challenge – an inability to align centrally planned resources with local needs.

None of that is news. The debate, like some slow-brewing tropical storm, has been building over the last three decades – centrally evidenced by the RSA’s City Growth Commission and today (rather more locally) illustrated by the energy around Bristol’s brilliant ‘Festival of Ideas’.   And this locally-driven rebalancing energy is also evident across many UK cities – at a pace, intensity, creativity and engagement that leaves Whitehall Departments in the shade.

This renaissance – the emergence of inspired local leadership and willing communities – is also a cultural expression that positions exponents at some distance from the tired dogmas of national political parties across the spectrum.

Critical impatience is, for example, articulated by Metro Mayors, regardless of Party affiliations. The Centre for Cities noted the marginalisation of these local champions at recent Party conferences and, this week, the C4C lead story is a repeat of a powerful post-election view of paralysis in parliament with a call for MP’s to support local initiatives.

I’m not a disinterested observer. I’ve written previously about Municipal Enterprise and the need to translate and apply the work of fresh economic thinkers like Kate Raworth and Mariana Mazzucato from national to more local perspectives.   I’ve watched the brilliantly creative work of Knowle West Media Centre building community cohesion in part of Bristol and for several years I’ve contributed to the work of the US-based Intelligent Community Forum with its global network of around 160 cities.

Whilst our national politicians are looking elsewhere, the new localism is an unstoppable force. This is an energy that is likely be further bolstered by the Intelligent Community Forum’s 2018 Global Summit when civic leaders, CIOs and community developers from many of the world’s leading cities come to London next June to share their experiences.   The current holder of the title ‘Intelligent Community of 2017’ is Melbourne, Australia. In recent years UK cities have rarely featured in the rankings but this year Knowle West was assessed as being amongst the Global Top 21 – a huge accolade for their imaginative creativity.

Let’s be clear (as politicians are fond of saying) communities are both economic and societal constructs – they embrace both the places where we work and where we live – and those of us who commute may belong to two or more.

In the gradual evolution of local empowerment, the creation of Local Enterprise Partnerships was supposed to have been a step along the way. No doubt they can claim some economic impact but for their wider communities these efforts pass largely unnoticed and, as noted in this week’s Economist, the divergences of well-being means that many feel they are being left behind.  Rather than celebrate diversities the good citizens of less-prosperous places are more likely to fret about ‘post-code lotteries’ when austerity drives down public service standards. Fortunate indeed are those places that rise above party politics to embrace inspired local leadership. But this is a balancing act – local threads woven into wider regional fabrics.

What marks out the new New Localism are signs of vastly greater local engagement – and with that higher-octane fuel the drivers of the UK economic performance and our social and cultural developments are very firmly in the hands of local communities and their place-makers.

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Can Blockchain really save the Brexit Bacon?

15 Aug

[Editorial co-authored by Susie McAleer of 21c Consultancy & David Brunnen, Groupe Intellex]

Brexit=uncertainty.   Business leaders have no idea how government negotiations with the European Commission will evolve. The likelihood that nothing will change is at, or very close to, absolute zero.

What is certain is that cross-border transactions will be different in at least two ways – pricing and regulation. The consequences (even if the UK moves to WTO tariffs) will probably involve potentially costly administrative adjustments to the way we all do business in any transnational flow whether import or export, inward investment, overseas acquisition, emigration or immigration.

Anyone already immersed in overseas trade will know the current complexities. In recent times it has been useful to (a) simplify the process and/or (b) outsource the hassle. Wholesale elimination of tariffs and trade barriers within the EU expanded the scale of accessible markets on our doorstep. But old customs die hard, so a new industry has emerged – an army of specialist intermediaries to handle the ‘red tape’ and logistical complexities that add extra costs but very little extra value.

Conventional analysis would see easy/local market access shrinking and also increased regulatory red tape, but could Brexit have an unforeseen silver lining? Some enthusiastic Brexiteers have suggested that technology can somehow bridge new borders.

  • Is it possible that we now have the will to design transnational transaction systems sans rubber stamps in triplicate?
  • Is it plausible that the UK could find competitive advantage through some new global protocol to make trading easier?
  • What is the chance that all other countries would agree and fall into line?
  • And could all this be designed and implemented before the guillotine falls?

It may sound unlikely but the underlying spirit of our digital times – disintermediation – should, in theory, sweep away the old (or new) roadblocks.

Consider, for example, the vexed question of a land border between Northern Ireland and the rest of that island. Their border had lost much of its polarising significance but may now return to regulate the flow of people, goods and services. Can technology save everyone the hassle of stopping, searching and rubber-stamping?

Well, in theory, yes. Adopting blockchain technology has the potential to create simple, fast and efficient systems for organisations on both sides of the border enabling them to trade using a robust, secure platform and network with automatically pre-assured customs clearances, dues paid and all boxes ticked.

The chain itself is simply an electronic document ledger that enables people and businesses to share information – financial, legal, electronic or physical asset description – securely across a network of computers without the need for a central authority, be it a bank or government department. No one member of the chain has the power or authority to change or tamper with the records, and the blockchain algorithms keep everyone honest by ensuring data integrity and authentication of the transactions. This transference of governance from centralized institutions to a system of distributed networks of peer-to-peer collaborators ensures a trust protocol is created and managed by the members of the chain, the ones who create and drive value, not by a third-party middleman.

So, that’s the theory, but what would the blockchain mean in real life?

In the Northern Ireland Brexit case blockchain could provide complete trade transparency enabling borders to be kept open without hindrance. For example, supply blockchain’s would ensure the provenance of food (the titular brexit bacon) and of goods that cross the border, ensuring they are transported at the right temperature, in the right volumes, keeping quality from source to destination without the need for overwhelming volumes of paperwork and ‘red tape’.

Selling high value assets, such as property and enterprises between those from Northern Ireland and the Republic could be made faster with automatic and immutable historic ownership data, from copies of deeds to due diligence information, thereby removing fraud and reducing bureaucracy.

The use of faster, secure payments means local businesses could rival bigger companies. Imagine if a local mini-cab firm could take on Uber by placing transactions on the blockchain, thereby removing the centralized organistation taking a 30% cut from fees. The idea of blockchain is to give better value/more money to those in the network, rather than large corporates based in, say, China or the USA.

Whilst the potential of blockchain is still largely theoretical, advances in its use for trade are being made. At the start of 2017 seven European banks (Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Société Générale and UniCredit) created the Digital Trade Chain (DTC) consortium in order to collaborate on the design, development and commercialisation of a shared supply chain management and trade finance platform for small and medium-sized companies (SMEs) using blockchain technology. In addition, a new initiative called BlockchainCITIES provides an EU membership platform of local authorities in BlockChain transition. Could we be on the cusp of reinventing the trusted city trading partnerships of the Hanseatic League in the 15th Century?

Perhaps a good UK starting point would focus on trade between cities within Commonwealth countries where we have a shared heritage of law and commercial frameworks.

However, it remains to be seen if the traditionally bureaucratic institutions such as banks and government can actually drive an innovation of this nature and overcome a range of deterrents from high initial capital costs to large computing power consumption. The new energy for development of blockchain-enabled cross-border trading will almost certainly come from major cities where inward investors could be attracted by frictionless trading environments.

BUT, all this hope (and hype) for an easier trading life requires massive concerted effort.

In the US-State of Illinois, for example, 107 students have been immersed in a month-long ‘hackathon’ to explore the possibilities.  Five pilot projects undertaken by the state include the areas of land title registry, academic credentials, health provider registries, energy credit marketplaces and vital records.

‘The state’s idea is that if it can figure out blockchain, there are a lot of record keeping and transaction processes that can be made more secure and more reliable.‘ – statescoop.com  But none of these pilots have yet tackled International Trade Transactions – most probably because they live in a giant single market where import/export rules are a minority sport.

As yet there is little sign that here in the UK we are assembling any similarly scaled collaborative efforts – and time to organise these before Brexit is slipping away.

Does the UK government have any clear idea of the investment required for such innovation?

And if the Department for International Trade is not on top of this, will some of our leading Cities take the lead?

Will we let go of something that we’ve not yet fully grasped?

One thing is certain; we have a golden opportunity now to transform digital platforms for the borders of tomorrow with Blockchain forming the central nervous system of trade.  Surely, regardless of Brexit outcomes, it’s time to start a chain reaction!

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(C) (2017) 21c Consultancy & Groupe Intellex

Enough is Enough: Being Growth Agnostic is not an Extremist Position

6 Jun

[Why I took Doughnut Economics[1] to the 2017 ICF Global Summit]

The time for tolerance of misguided creeds is over. That’s an existential issue for politicians searching for economic growth.   The relentless pursuit of progress has not suddenly vapourised but its measurement is, at last, being sidelined.

Economists and politicians have known since the 1930’s that GDP is a poor proxy for progress. The conventional metrics do not come anywhere near measuring the value of real activities. But even if GPD was better formulated it misses the point. The purpose of policy should not be some slavish devotion to a metric and particularly not to one so unfit. But arguing for some higher purpose begs the question: without growth are we doomed to decline? Nobody surely votes for making things worse?

Dissatisfaction with GDP growth addiction is deeply rooted. For decades economists have tried different rationales. Could we, please, have Green Growth (more sustainable) or Inclusive Growth (more equitable) or even Humanistic Growth – presumably less inhuman? The rationales for policies to be regenerative (less wasteful) and redistributive (fairer) are well argued and sometimes non-contentious – leastways, perhaps, at some future ‘transitional’ time if not inconveniently right now. These growth-variants may not immediately upset the supposedly free market dogma. But they are still argued in the context of never-ending growth that will somehow ease the pain of eventual readjustment – really?

Take away that prop – declare that we need not overly care about economic growth – and the well-established response is that the sky will fall down. This growth detox is one of the central tenets of Kate Raworth’s unexpected best-seller ‘Doughnut Economics’.  Kate is the latest in a long and fine tradition of economic re-thinkers starting in the 1930’s with Simon Kuznets who first defined what was then called Gross National Product. He well understood its shortcomings and mourned its excessively ill-informed but widespread application.

Being Growth Agnostic, as much as it may offend all right thinking dogma-driven hard-liners, is not some denial of economic variability – the course of life rarely runs smooth (in sickness and in health) – but is simply a matter of therapy for the growth-addicted and a reminder that true leadership should aim for some deeper (or higher) purpose like societal safety and wellbeing.  And whilst we are in brain reboot mode, can you please stop calling all those investments that happen not to be to your liking, by the derogatory label ‘subsidies’?

There are many reasons for reading Kate Raworth and her illustrious forbears such as Donella Meadows and Manfred Max-Neef (and more recently Lorenzo Fioramonti) but expecting her book to somehow magically reprogramme the deeply embedded dinosaurs of national politics is not one of them; far better to take her inspiration and apply it locally within your own community.

Mayors and civic leaders are desperate for direction every bit as much as they are constrained by top-down austerity. In the search for ‘taking back control’ these community champions can use the doughnut (and other frames) to spark imaginative and enterprising routes to greater public, private and environmental wellbeing. Low flying demands great skill and is risky but it gets stuff done under the radar of the high flyers.

Enough is enough. It really is time to shake off our tolerance of dented and dodgy rulers. We must not rest until we’ve rebuilt our local communities. If that reconstruction of better places turns out to be Growth Agnostic, well so be it.

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[1] Kate Raworth, ‘Doughnut Economics‘: ISBN 9 781847 941374

Reviewing the situation . . . .

19 May

Ofcom’s recent ‘separation’ stricture has ensured that BT Group’s annual results presentation to the city gave greater airtime to the leadership of its now semi-detached property, Openreach.

Investors need to understand past performance and assess the forward risks and opportunities.  The bigger picture – mighty ships battling against headwinds – was roundly ridiculed as thin cover for self-induced blunders rather than unknowable forces of nature.   Could that overall decline, investors might ask, be offset by Openreach’s discovery and ultrafast colonisation of new Gigabit lands?

Last week, the captain of BT’s Openreach gave his crew early warning of a new direction. But his ship’s crew comprises far more than loyal employees – it’s a complex weave of stakeholders including investors and wholesale customers (Communications Providers – the ‘CPs’) – so the occasion provided anxious risk-takers with opportunities to read the runes.

Openreach chief exec Clive Selley was reported as saying; “So it is my job to collaborate closely with all the other CPs to figure out at what pace we roll out the ultrafast platforms. And we are going to do that hand in glove with the CPs, because ultimately they are the ones that are going to have to compete and beat the alt-nets in the market place.”

Inevitably the tech-media headlines shouted ‘Fibre Rethink‘. But the espousal of an enhanced collaborative credo suggests more than relationship counseling. Was this a concern to nip in the bud any hint of a wholesale mutiny or jumping ship? Why so? It’s a reflection of finding a radically different market situation to that for which the CP crew had first been recruited. They signed up to flog phone-lines and ‘leased lines’.   Now they need to shift to new services that need far greater reliability and capacity and have little in common with the old voice telephony. The CPs have laboured long with short-term fixes and unlikely performance claims. Now they are increasingly attracted to work with those alternative network pioneers and are held back only by the rate of pure fibre deployments.  Meanwhile Openreach still holds to seeing those very different, vastly superior and ‘fit for future’ networks as direct competitors rather than contributors to the greater good.

Other (imaginary) voyages of discovery

Imagine if you will, dear readers, that this is the year 1500.

The good ship Openseas is sailing nervously towards the previously presumed precipitous edge of a flat world – and the crew are mightily troubled by the rumoured fate of earlier voyagers who did not return. On the bridge the captain anxiously scans the horizon but he and his crew are alone. Their resolve to push on can only come from an inner determination. These are complex and confusing seas with shifting currents and a need for confident navigation. With no hope of external assistance they must overcome fears or resign to their fate but they will earn (eventually) the accolade, ‘pioneer’.

And now, friends, imagine that we are in the year 1839.

In the latest episode Dickens’ Fagin is casting around for a way out of social storms on all sides to secure his survival. Desperately he considers the alternatives:

“This rotten life is not for me.

It’s getting far too hot for me.

Don’t want no one to rob for me.

But who will find a job for me,

There is no in between for me

But who will change the scene for me?

…I think I’d better think it out again!

Hey!”

There is, of course, no one to ‘change the scene’ – he alone must choose a new path. To survive, his enterprise must think again to find a new re-formed direction that rejects all previous convictions and missteps along the way. That resolve may be prove to be beyond his reach.

And so, back now to 2017.

Is it any wonder that Openreach is ‘Reviewing the Situation’? Is this the end of ‘the line’ or is this, beamed through pure fibre, a new, low energy, low maintenance, high performance, enlightenment that costs far less and shines far brighter for his enterprise and for the for the entire economy?

So, let’s wrap up this reflection with the answer to a light-bulb joke. It takes only one psychotherapist to change a light-bulb but that light-bulb must really want to change.

 

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Blessed are the Place-Makers

2 Apr

To cynics the notion of changing what counts, and what is counted, is a classic goalpost-shifting exercise. From the top-down perspectives of macro-economists, barring a few definitional disputes, the numbers revealed by, say, VAT returns are solid. On the other hand, anyone rooted in the economic and social behaviors of local communities observes an extensive colour-chart of micro-shades. Both, however, would agree that, whilst artistically fashionable, citizens and their clustered communities could do without those distressed finishes.

As searchers for new growth strategies loudly sing cuckoo, Whitehall’s acknowledgement of the shortcomings of sectoral economics has been a long time a-coming in.

Call it devolution, call it empowerment, call it subsidiarity, call it place-making, call it Inclusive Growth, Municipal Enterprise or Regionomics, but whatever way you call it there’s no denying that economic growth and social development cannot be commanded from on high but must be created through local leadership.

That much, of course, was foretold by Lord Heseltine and his LEPs, The RSA’s City Growth Commission, the champions of Metro-Mayors, endless analysis by the Centre for Cities and myriad reports that sit uncomfortably with deep-set post-80’s dismissal of Local Authority competencies. And austerity certainly didn’t help the Northern Poorhouse.

But this new place-based impetus is not now an optional ‘nice to have’. The Brexit notion of tearing up the book, throwing the pages in the air and seeing what could be done with the pieces heralds a remarkable opportunity to do things differently and to do different things. Whitehall may not yet be entirely convinced and parliament may resist a more federal diminution of their imagined importance but, glory be, the people have spoken.

What is needed now is a clear understanding of how to better nurture place-making, local economic growth and community development. There’s no shortage of ideas that are soundly based on experiences from around the world.

Of course there’s a shortage of local data evidence – but no shortage of imagination.   Some cities and communities prosper whilst others decay. It’s not difficult to understand why. Assessing the fabric of local economies means taking account of cross-cutting programmes that bind those vertical economic sector silos together. The priorities may vary to match local needs but local leadership needs a plan.

So, as summer is a-coming in, we say ‘blessed are the place makers’ for they are inheriting the opportunity to build a better future.

 

So squeezed they stopped squeaking to each other

22 Feb

Oft-lamented short-term pressures drive the search for ‘asset efficiencies’.   With the benefit of hindsight, the making of unforeseen consequences seems to be rooted in a disregard for fairly obvious but difficult-to-measure policy impacts.

In corporate careers, management brownie points seem often to be awarded for displays of macho discipline encouraged by ‘perverse incentives’. Whatever the motivations, it is surely a matter of good governance that that short-term wreckers are not allowed to destroy values that underpin future sustainability.

Question Marks And Man Showing Confusion Or Unsure

But still it happens. Whatever presentational flavor of austerity or efficiency or asset utilization is used to justify the squeeze, the consequences are inherited by the next generation – or at least the next elected set of policy makers.

Or is that really so?

A recent article in The Economist takes issue with the conventional theories around short-termism.  A McKinsey study had argued that 73% of firms were short-termist and the ‘elite’ 27% actually performed better. However, the Schumpeter columnist begged to differ; questioning the evidence and doubting both the causality and relevance of labelling firms as short-term or long-term actors in our very dynamic market environments.

The Economist writer does, however, point out that many big firms ‘wallow in lucrative stagnation’ where profits are high but investment seems not to be boosted by the currently low cost of capital. Rather than label them short-termist and urging them to invest, the real need is for more rigorous competition policy to target ‘fat’ incumbents and boost new market entrants.

Such competition policy rigour might not be immediately popular amongst the self-regarded leaders but it is evident, in one sector at least, that this strand of policy imagination has already taken root. Hence the Chancellor’s autumn statement to inject funding into new entrants deploying ‘full fibre’ networks and also the recent indications coming from Ofcom of an urgent need to deliver ‘at scale’ the sort of infrastructure required to sustain a post-Brexit economy and enable (beyond 2020) an entirely future-proof collaborative architecture to support 5G Mobile.

So despite the common interpretations of austerity, efficiency, cuts, the general woe around short-term follies, narrowband thinking, or ‘squeezing until the pips squeak’, the more mature lesson seems to have been learned that those who are ‘too big to fail’ probably should.

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