Higher productivity causes unemployment which can only be alleviated by new growth. When demand is racing along in the boom years the inescapable logic of this arithmetic is disguised. When the boom comes to a shuddering halt, it’s painfully clear. The current conditions are low growth in output and productivity – so it shouldn’t be so much of a surprise that unemployment has begun to fall.
Nor that inequality is persisting. nef reports that most EU countries have a gap between their richest and their poorest regions. But the distance between the UK’s richest and poorest regions is shockingly larger than any other. At one end the richest area in Europe is West London (or at least its leafier parts towards the city’s centre). At the other end of the scale is West Wales – earning just 20% of West London’s figure. Sure, this can partly be explained by London’s exceptionalism as an international city, but the crisis has only perpetuated the gap between the capital and the rest of the country.
The solutions need to be different to those tried in the past. For a start, end the reliance on fdi. As the FT reports this is drying up. Instead, Wales can look to new ways to mobilise local sources of capital investment. Already a net exporter of energy to the rest of the UK, it has a huge potential renewables resource in both wind and water that is as yet untapped. New models of co-operative ownership, breaking the hold of major corporations on energy generation, could allow local communities to share the revenues from energy generation.
And Wales has already an excellent example of mutual ownership in the form of Welsh Water – a major utility owned by its customers. If those parts of the country outside of London’s charmed orbit are to have any prospects of sustained recovery, they will need to break with failed, earlier model of development: making realistic assessments of their local strengths, and working to them; breaking with a dependence on external finance, driven by the City; looking beyond profit-maximisation to wider, social concerns in order to drive investment.
Still – the new participatory economy comes daily into stronger life. A couple of local lets-sort-it-out-oursleves examples. The first is the idea of impact volunteering – that volunteering focused on clear outcomes is becoming more disciplined and organised. Other – food sharing, connecting travellers and home cooked meals.