Growing the economy from the middle out

In his new SPERI paper Craig Berry suggests it is crucial to make a connection ‘between the new order and individual livelihoods’.  This resonates with two recent reflections of my own, which have come from my work with a number of communities who are attempting to regenerate their economies from the bottom up.  Some of those communities are within areas where apparently huge economic opportunity feels frustratingly out of reach to those untouched by the office blocks and new infrastructure shooting up around them – like, for example, some of the communities in the poorer housing estates in and around Manchester and Salford.  Other communities lack geographical proximity to new economic opportunities, but are struggling (often heroically, and ingeniously) to regenerate their economies, with very little in the way of building blocks such as infrastructure, investment or footfall – such as in Withernsea, to the east of Hull, or Shiney Row, near Durham.

Thriving communities or a thriving macro-economy?

My first thought is that the current devolution debate – particularly in the context of a regional economic strategy – is a useful lens through which to consider a fundamental question about how we think the economy should work. Is the ultimate goal to improve the experience of individuals and communities where they live and work, or is it to improve the performance of the national economy on the global stage?  And of these, which is the driver, and which is simply the knock-on impact of how we make economic policy?

Devolution could, and should, be an invitation to ensure that the former goal is the fundamental driver for regional and national economic strategy.  However, successful current devolution deals have been based, first and foremost, on presenting a convincing case for how the region in question will contribute towards national growth.  Placing the emphasis on thriving communities is a necessary shift in focus if the devolution process is to avoid embedding and reinforcing a problematic approach to economic development.

Top-down, bottom-up – or from the middle out?

My second reflection is on how, if we’re serious about developing a credible and palatable alternative economic growth model, that works at a regional level? The existing growth model, as Berry outlines, assumes that GDP growth will lead to economic benefits for all.  This has not been the case: our current system fails to deliver distributed economic benefits across the population, or to generate sustainable, resilient economic systems at the local, regional or national level.

So what are we trying to generate through our economic system, if not simply ‘growth’? The New Economics Foundation has recently published work on alternative measures of success at the national level which pinpoints the headline indicators that really would denote a balanced economy. To move towards these kinds of outcomes I would suggest there are four basic aspects of a ‘well functioning’ regional economy:

• people are doing well financially;

• the businesses and organisations in that economy are resilient, diverse in sector and scale, well connected, and thus resilient to shocks and change;

• supply chains in that economy allow money flowing into it to circulate many times, through many businesses and many peoples’ pockets, generating a strong ‘multiplier’ effect, rather than the money leaking straight out again;

• the local economic system makes sustainable use of environmental resources including materials, waste, physical spaces and energy.

What kind of economic development approach gets you to this place? The sectors upon which economic development strategy is based are key, both in terms of their direct impact on people’s jobs and wealth, but also in terms of their respective knock-on effects in stimulating other sectors.