The underlying causes of an unbalanced economy
We don’t live in a very literate age when it comes to economics. There are still people in Whitehall, even the Treasury, who believe that somehow – if cities decline or fall, if one place succumbs to grinding poverty – that is it the ‘market’ that did it.
However much you might believe that broadly free trade is the best policy (and I do), the idea that markets are never faulty has been a recipe for no proper action to help support neighbourhoods, towns and cities which get sidelined.
Take small business, the lifeblood of the economy, for example.
Small business now earns 51 per cent of value added in the UK economy. They should therefore be getting a similar proportion of the business investment available in the UK. If they are not doing so, then it is a sign of serious market failure and we need to provide the intermediaries and institutions which could make this possible.
But we all know that that the vast bulk of business investment goes into big business. That is not the market, it is an inefficient distortion which is one of the root causes of an unbalanced economy. It is a result of serious failures of financial institutions, which have no skills or knowledge with dealing with the real economy at local level.
That is one of the findings of the first New Weather book, People Powered Prosperity, which publishes the findings of our project to translate between the two worlds – the local economic activists and the mainstream policy-makers at national level (thanks to support from the Friends Provident Foundation).
It sets out a new narrative for very local economics, based on local financial and enterprise institutions, which might be embraced by national politicians – and by the Treasury. It is a potentially important intervention to kickstart a vital debate – why mainstream policy-makers are so suspicious of revitalising local economies, the only basis for the real devolution of power.
It isn’t very long – so give it a read and tell us what you think!