Our economy isn’t working

No comments

Can Greater Manchester pioneer a new way of doing things?

By Graham Whitham

The UK is failing to ensure economic and jobs growth leads to higher living standards for all. GDP growth has been positive in every quarter since the end of 2012. The employment rate is at a record high and the unemployment rate at its lowest level since 1975. Yet, living standards aren’t going up and the IFS says incomes for the average family will not grow over the next couple of years.

In contrast, the richest 1% have recouped losses in income from the financial crash. That’s because the economy is configured so that wealth is increasingly captured by capital rather than workers. The richest 1% have received a quarter of the £4 trillion national increase in wealth since 2000.

Policy encourages a business culture that promotes short-term, shareholder driven approaches, at the expense of workers, who have found their position undermined. The UK has adopted this business culture and approach to its economy despite high levels of economic inequality hindering economic success, and evidence that putting money in the pockets of those on low incomes reaps greater economic rewards than concentrating wealth in the hands of the very rich. A new approach is needed.

As the birthplace of the cooperative movement, and a place with a proud tradition of doing things differently, Greater Manchester should be at the forefront of a new economy that fosters alternative business models that re-balance wealth distribution and shift power relationships. The phrase, ‘What Manchester does today, the rest of the world does tomorrow’ may stem from a very different economic school of thought, but this city region should be at the vanguard of a new, more human centred economy that lights the way for the rest of the country.

Alternative structures of business are emerging that are better geared to sharing wealth more evenly. These are either mission driven or ensure that the stakeholders most impacted by the business also own the business. Such business structures are geared to not only reinvest more into their business but also work more constructively for the benefit of all stakeholders.

Employee-owned businesses, such as John Lewis, have grown significantly in multiple economies, outperforming other businesses on sales and employment growth. Studies on employee ownership show that those types of businesses generate more employment growth and lead to significantly higher pay for their employees.

Multi-stakeholder cooperative models also aim to balance the interests of various stakeholders, such as consumers and workers. These typically structure company governance to ensure that the interests of workers and consumers, or producers and buyers are balanced in key decisions, including on how profits are used. The Go-op train cooperative is one example of this model.

Fostering an alternative approach to business and the economy in our city region will require an acknowledgement across GM that ‘trickle down’ doesn’t work. Whilst the Manchester economy has remained relatively robust, the city region is home to lower than average wages, some of the highest levels of child poverty in the country and growing inequality between the south and north of the conurbation. A plan for addressing these challenges and implementing an alternative GM economy should include:

•  Adoption of human centred indicators as a means of measuring economic success.

•  Promotion of companies that adopt alternative business models through

◦  active public procurement that favours such models

◦  access to finance for such businesses through a regional/local investment bank

◦  tailored start-up and business development support

◦  trialling business rate deductions and working with central government to identify other incentives for such businesses.

•  Promotion of decent work, including the voluntary Living Wage, through

◦  Development of a Decent Work Standard and appointment of a Decent Work Commissioner

◦  Adoption of the Decent Work Standard across all public sector bodies.

◦  Introduction of a GM wide Employment Charter (based on the Standard) with real teeth

◦  Active public procurement that favours businesses that provide decent work

◦  Working with businesses to identify means of effectively measuring the business benefits (e.g. employee morale, productivity and retention) of adopting decent work employment practices.

•  Promoting positive corporate behaviour through greater transparency around business behaviour and practices.

Graham Whitham, Director of GMPA and author of report on economy for GM Poverty Action

Graham Whitham

The UK faces major challenges of in-work poverty, stagnating living standards, low productivity and the prevalence of poor quality work. There is widespread acknowledgement that the economy doesn’t work for all, but lack of a concerted effort to adopt a new, alternative approach at central government level. Greater Manchester should be a beacon for a new way of doing things, becoming a home for companies that do things differently.

 

adminOur economy isn’t working