The Future of Local Economic Development

Ines Newman

• Publisher: Routledge
• Year: 2013
• eBook ISBN: 9781317988700
• Topic: Business
• Subtopic: Business General
• Index: Business

This book looks at the future role of local economic development. Once New Labour came to power in 1997, they sought a third way between the new right agenda of Thatcherism with its attempts to reduce the role of the local state and foster a free market and the left's attempts to take more control over the local economy in the interest of workers. In July 2007, Gordon Brown's government published the 'Review of Sub-national Economic Development and Regeneration'.

This book argues that competitiveness and neo-liberalism, or increased market domination over an ever wider range of social relations, have in reality dominated New Labour's policies. Yet a number of contradictions remain as New Labour continues to seek a reduction in poverty and regional and local disparities. The book analyses the changes that will result from further market domination under the Sub-national Review but also the opportunities that will arise for local economic development agents, particularly those with a concern for social justice. It looks specifically at regional and sub-regional strategy making; partnership, networking and building institutional capacity; local labour market policy and policy towards cities. An additional feature of the book is that several authors draw on international comparisons.

This book was published as a special issue of Local Economy.

FEATURES

Introduction: The Future of Local Economic Development

INES NEWMAN

In May 1999, Mike Geddes and I published a article in Local Economy, Evolution and Conflict in Local Economic Development, in a special issue to commemorate the life of Sam Aaronovitch, the founder of the journal. The article sought to trace and analyse the debate over the direction of government policy looking as we said ‘at the conflicts between new right and new left approaches in the 1980s and the ‘New Centrism’ that has emerged from this struggle in the 1990s’.

We argued in that article that the principles for local economic development that came out of ‘new centrism’, (the balance between competition and collaboration; the importance of supply conditions, especially training; partnership; a strengthened regional context; and the increasing importance of ‘sustainability’ and community economic development) all embodied significant tensions and conflicts.

As the ‘Blair’ period, which was characterised by Antony Giddens’ ‘Third Way’, ends and we move into the ‘Brown regime’ it is timely to re-examine the issues we raised. Is the Brown agenda, set out in the recent sub-national review (HM Treasury et al., 2007), likely to resolve these tensions and if so what does that mean in terms of who will benefit from future policy direction? Furthermore what does it mean for the role of the economic development officer, particularly those on the left with a concern for social justice?

This article is divided into three sections and serves as an introduction to the other articles in this special issue of Local Economy, which look at policy towards cities (Ivan Turok), labour markets (Alex Nunn and Steve Johnson) and new approaches to developing softer outcomes such as building networks, partnerships and institutional capacity (Graham Haughton and Phil Allmendinger), and the In Perspective section, which looks at the future role of economic development practitioners from a variety of those currently involved in the field. The first section of this article looks back at ten years of the Labour Party and the ‘third way’ agenda and the tensions we originally identified and asks what has happened in these. The second section outlines the Brown era and lists the policy changes that are to be anticipated as a result of the sub-national review. The final section of this article identifies where I believe there is still scope for progressive policies within local economic development.

Looking Back Over 10 Years of New Labour

The Dominance of Neoliberalism

In 2004 Antony Giddens sought to justify his influential term ‘the third way’ by claiming it was just a label to cover all attempts to find a ‘revisionist social democracy’:

The Third Way, as I have always understood it, is simply a label for the renewal of social democracy. Centre-left parties across the world have revised their doctrines in the light of social and economic changes: the disappearance of socialist utopias, globalisation, the development of a service economy and ageing populations. In the face of these, the First Way – classical social democracy, based on Keynesianism and traditional statism – has become largely obsolete. The Second Way – Thatcherism or free-market fundamentalism – proved a disastrous alternative. The aim of Third Way thinking – revisionist social democracy – is to create policies for the centre left that respond to these changes. (Giddens, 2004)

Interestingly Brown has only used the term ‘the third way’ once over the last ten years (Lee, 2006). Its vagueness and failure to provide an intellectual framework for a left-centre approach may be the main cause of his rejection. But more significantly those on the left studying New Labour’s record have shown that the last ten years have been dominated by neoliberalism and that, despite the rhetoric, policy development has been very close to Thatcher’s free market fundamentalism. Neoliberalism is here taken in the wide sense of a ‘framework of disciplinary political authority that enforces market rule over an ever wider range of social relations throughout the world economy’ (Brenner & Theodore, 2002, p. 14)

At a recent seminar on Labour and Planning organised by Tim Marshall and Andy Inch (see http://www.pnuk.org.uk/newlabour.htm and forthcoming Planning Practice and Research) Stuart Wilks-Heeg (2007) from Liverpool University argued that New Labour had succeeded in successfully implementing failed Conservative neo liberal policies. He gave four examples.

• The 1998 Education Act sought to introduce grant maintained schools and City Technology colleges but only succeeded in creating 15 City Technology Colleges. We now have proposals for 128 city academies by 2009.

• The 1988 Housing Act promoted large scale voluntary transfer of housing estates but by 1992 only 1.9% (15) had transferred contrasted by 2006 when 148 authorities had transferred their stock.

• The 1988 Local Government Act introduced compulsory competitive tendering but 80% of service provision remained in house. Now with the emphasis on choice, contestability, value for money and pressure through the comprehensive performance assessment, privatisation is accelerating.

• The Conservatives introduced the private finance initiative (PFI). The scheme was moderately successful in health and transport but only one local authority signed a PFI scheme under the Conservatives. In total 34 PFI schemes were agreed in the ten years 1986–1996, worth £2 billion. Since New Labour came to power the scheme has been revamped and in the following ten years, 1996–2006, 549 PFI schemes were agreed worth £51 billion including many local authority PFI schemes.

This argument has also been made strongly by Stuart Hall (2007, pp. 119–120):

New Labour’s long-term mission seems to be, broadly, the transformation of social democracy into a particular variant of free-market neo-liberalism. … In the first phase of the so-called neo-liberal revolution, Thatcherism installed the enterprise culture and ‘market forces’ at the heart of society, in the effort to dismantle reformist and redistributive ‘welfare’ habits and expectations. An economic logic organized around ‘the market’ became entrenched as the new social discourse, the sole measure of efficiency and social value. New Labour has taken this first phase as its platform, expanding ‘marketization’ as a general approach not only to the public services, but to the ‘modernization’ of the public sphere and all the wider institutions of civil society and social governance – spheres traditionally associated with Labour – which have hitherto evaded the full rigours and disciplines of a market logic.

Alan Finlayson (2003) has looked particularly at the use of the term ‘modernisation’ by New Labour as a conceptual hook to reconcile a neoliberal analysis (putting growth high on the agenda) with social democracy. Modernisation was linked to metaphors of nature – it was something you have to adapt to, you need to ‘modernise or die’. But it was also a ‘historic opportunity’ to be tackled by ‘new’ Labour. Finlayson points out that there is a fundamental contradiction between these two uses of modernisation – how can modernisation be something you have to live with and at the same time be an active innovative policy? But, despite this contradiction, the terms ‘Modernisation’ and ‘New’ have served the government well for, like motherhood and apple pie, you cannot be against modernisation. After ten years, modernisation is now fading as a metaphor but increasingly there is an appeal to hegemony: ‘You can’t possibly think/believe!’ Stuart Hall argues that this hegemony has been achieved by using consumer choice and diversity as levers to prize the state open for creeping privatisation and conceptualising the government, on the Tesco’s model, as a ‘delivery’ system. Delivery becomes the function of government undermining the very notion of a public sphere or a ‘public interest’ and what remains are apolitical matters of the technicalities of administration, the delivery of services and the ‘governance’ of society.

Crispian Fuller and Mike Geddes (forthcoming 2008) have drawn on Peck and Tickell’s (2002) concept of ‘roll-out neo liberalism’ with the state seeking to further embed neoliberalism while also trying to address the contradictions and tensions arising from it. Haughton and Allmendinger in their article in this special issue pursue a similar theme when they talk about ‘metagovernance’ with the nation state reworking and rescaling responsibilities across the tiers of governance and retaining control through its strategic selectivity about who it lends powers to, on what terms and how it chooses to redraw and redefine its distribution of powers over time.

Yet despite the dominance of neoliberalism and marketisation and the broad policy orientations towards privatisation, workfare employment policies and a market bias, the tensions we identified in our article ten years ago have not diminished. New Labour does still hanker over a reduction in child poverty, an end to discrimination and saving the planet from climate change.

Continuing Tensions

Alex Nunn and Steve Johnson in their article in this special issue argue that competitiveness is seen as fundamental but that New Labour has dealt with the tension between competitiveness and collaboration by seeing collaboration and networked governance as a way of delivering competitiveness. This theme is picked up in Graham Haughton and Phil Allmendinger’s article in this special issue, which argues that the very process of partnership and collaboration creates its own pressures for conformity, if not unity, in agreeing which behaviours and visions are deemed acceptable to the majority of partners. So it could be argued that there is no longer a tension between competitiveness and collaboration. Collaboration is now used to further competitiveness. This is also being promoted by Multi Area Agreements (MAAs) and by the agenda for shared services and two tier pathfinders which are likely to result in further privatisation.

While this overall trend is both important to observe and certainly underpins how New Labour has tried to address the tensions, some tensions still remain. It is clear that ‘place making’ as the key function of local government sets a very competitive agenda and is very far away from previous definitions that centred on the welfare role of local government. However, this does not sit easily with government aims to reduce the differential growth between regions. As Ivan Turok argues in his article in this special issue, there are tensions ‘between focusing on core cities as new-found drivers of contemporary growth’ rather than older less competitive towns and cities and between encouraging London as a world city and encouraging development in the North. The results is a growing divide between rich and poor with less and less room in the south for those households who are neither rich nor poor who have either moved elsewhere, or become poor (Dorling et al., 2007).

There has been a significant shift in the tensions between flexible labour markets and good quality employment under New Labour with emphasis on work as a way out of poverty linked to improved working rights and conditions: the minimum wage; tax credits; maternity and paternity leave; part time employment rights; reforms to the regulation of the transfer of public employees with pensions and working conditions covered for local authority workers; and the introduction of trade union learning reps. However, half the children in poverty are in a household with an adult in work (Palmer et al., 2007) and work is clearly not always offering a route out of poverty. Furthermore, there is considerable churn at the bottom end of the labour market into and out of employment (job outcomes for mandatory New Deal participants have fallen to 40% for under 25s, and under 30% for over 25s; Simmonds, 2007) with problems of debt exacerbated by the benefits system failing to deliver benefits as soon as someone falls back into worklessness. Alex Nunn and Steve Johnson talk about ‘flexicurity’ with the attempt to create employment opportunities through competitiveness rather than job security. This focus on employment is underpinned by the focus on cities (see Turok’s article in this special issue) and the RDA target of an 80% employment rate and a skills target rather than any target on pay or on reducing unemployment. There is still not enough attention to the aspects of the Freud report that called for long-term support to raise employees out of in-work poverty and poor quality employment continues to drive people to seek incapacity benefits support. So the State’s spending on tax credits and incapacity benefits continues to undermine investment in competitiveness.

And despite the increase in the employment rate over the last ten years, at 74.7% (National Statistics) for the three months to November 2007, it is just below the rate it reached in 1972–75 and 1998–90 (Bivand, 2007). And despite 700,000 (17%) children being lifted out of poverty since 1998/99 (on the after housing cost figures), the government has missed its target of raising a quarter (one million) of the children out of poverty by March 2006 and progress is now stalling. The social exclusion task force is now concentrating on four groups who are victims of exclusion (prisoners, children in care, those with mental health problems and those with learning difficulties) rather than looking at the processes that exclude such groups in the first place.

We have argued that the tensions around competitiveness and collaboration have been addressed by trying to use collaboration to further competitiveness, but the tensions between sustainability and economic development have not been addressed at all. In the performance criteria set for RDAs and for local authority economic development there is no measure of sustainability. The climate change agenda and the economic development agenda run in parallel lines (Jones, 2007a) and if they meet economic development tends to dominate. The shifts in planning policy to facilitate major infrastructure investment, to respond to housing demand, to be demand-led and to favour development of all kinds, but most particularly, of course, for economic development, are evident.

The Brown Era and the Sub-national Review

Although Gordon Brown has not used the term ‘the third way’, one can anticipate a continuation of roll-out neoliberalism. The analysis of Gordon Brown’s ideological stance has emphasised two aspects.

Firstly Gordon Brown has highlighted the superiority of the British reformist agenda with the emphasis on the individual and moral virtue (Lee, 2006) drawing on the work on Adam Smith who came from his home town. Matthew Watson (2007) has shown how Brown, in introducing asset based models of welfare and in his focus on social responsibility, draws on Smith’s theory of moral sentiments, which focuses on how man can learn to live harmoniously and to flourish in a commercial society. But while Adam Smith argued that you need self command and moral tutoring to avoid self interest dominating in a market society, Brown argues that the self disciplining financial agent is pursuing their own self interest. He therefore individualises society’s interest. But there is a contradiction in his approach. For assets to be profita...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Contents
• Preface
• VIEWPOINT
• FEATURES
• IN PERSPECTIVE
• Index