Introducing the foundational economy

1. Introducing the foundational economy Julie Froud, Colin Haslam & Karel Williams

2. Presentation in 3 parts 1. Why the foundational economy (FE) matters: Colin • Demand side: sustains wellbeing now and in future generations • Supply side: distributes welfare through jobs for nearly half the Welsh workforce 2. How to make it work better: Julie • Demand side: recognise the wellbeing drivers so citizens have better foundational access • Supply side: build more grounded and responsible firms, learn from experiment 3. Changing how we think and do: Karel • New metrics: residual income and foundational liveability • New ways of doing things: citizen participation, enabling government, foundational alliances

3. What is the Foundational Economy? Part of a zonal way of thinking about economies + how different zones matter. Policy focuses on the tradeable; rebuilding after collapse of Welsh coal, steel, light manufacturing. But, GVA gap is not closed; high tech often does not employ locals; inward investment vs disinvestment. How explicitly addressing the foundational zone can help with ongoing challenges.

4. Why the FE matters?-wellbeing critical-half the Welsh economy-pathway to sustainability

5. Why the FE matters?(1) wellbeing critical for households on demand side • Household wellbeing depends daily on foundational essentials where interruption of provision = immediate crisis • providential services like health services and care, universal primary and secondary schooling = the badges of our civilisation • material infrastructure of pipes and cables connecting households to systems which make everyday life possible & safe, and added 20 years to urban life after 1880

6. Why the FE matters?(2) half the Welsh economy on standard supply side measures

7. + the resilient half of the Welsh economy stabilising, equalising, solidly performing • FE is fairly resilient because distributed according to population e.g. health and care, electricity or water… as long as you retain the population • stabilising because demand is often non-cyclical and despite austerity cuts, FE share of GVA 2007-16 = 44-45% • equalising as long as education, health, BT & rail franchisees pay the same UK-wide wage rates • solidly performing + national skills reservoir: Welsh material sectors = high GVA productivity at £56k per capita + providential sectors distribute 77% of revenue as wages

8. FE activities are high wellbeing but with high and low carbon content

9. Why the FE matters?(3) bridge to sustainability/ aligned with Wellbeing of Future Generations Act • FE can help Wales on to a transition path which mitigates climate change and secures wellbeing of future generations • Quality health, education and care services plus social infrastructure e.g. parks and libraries offer output that citizens want, with little carbon penalty. • The 3 high carbon consumption sectors offer scope for decarbonising e.g. grant aided upgrading of Welsh housing (as with 1960s bathrooms into terrace houses).

10. Making the FE work better:balance infrastructures, build grounded firms,learn from experiment

11. What are the drivers of wellbeing? We live in an income based society but wellbeing depends on 3 other drivers: grounded, mobility and social infrastructures Access and quality of much in 2, 3 and 4 depend on social investment (public or private); i.e. what you cannot buy from private income Income through jobs is only one part e.g. per capita, Londoners spend £10k more than in Wales, but £7k of that goes on more expensive housing Yes to better jobs closer to home but many Welsh jobs are still poorly paid and/ or irregular A balanced approach to all four drivers

12. Making the FE work better (1) recognise the wellbeing drivers on demand side • Wellbeing goal = all households have access to high quality and low cost foundational good and services. • We need to know more about how places work + what matters to people: our Morriston fieldwork highlights complexity of issues and priorities • Issues around car dependence: 86% own or usually have access to cars; 40% never use the bus which remains a foundational service (for a minority) • Social infrastructure is the number one priority of citizens in all demographics e.g. the condition of the park + high street, the absence of youth clubs

13. Making the FE work better(2) Absence of grounded firms on supply side • UK wide problem = absence of grounded firms embedded in region by ownership, supply chain & skills: • A missing Mittelstand in Wales: just2,000 firms employing 50-250; churning of ownership after family sells to a corporate e.g. Rachel’s Dairy or Halo • Growth of micro firms (typically employing less than 2) which account for 33% of employment • If we value capable, grounded firms (for-profit & social enterprise) Wales has too few like Jenkins Bakery, United Welsh or Dwr Cymru

14. Making the FE work better: (3) Build more grounded firms in the FE • We can build grounded firms in FE sectors like food processing + adult care. • With a new experimental approach for SMEs, starting modestly + then working to change what’s possible; which goes beyond counting local invoices by Welsh public sector anchors. E.g. • A new kind of relational procurement to build capable mittelstand firms + open up public contracts to smaller firms where adding finance is irrelevant • A new policy framework and finance for continuity of ownership + management in SMEs,especially when the founding family wants to exit

15. Making the FE work better(4) Not generic recipes but FE learning from experiment • Mainstream policy has standard recipes for jobs and growth: invest in skills training and transport infrastructure & compete for inward investment • FE sidesteps because policies for wellbeing bridge economic and social domains • FE is about learning from experiments which engage local specifics; tackling “wicked problems” and awkward constraints: e.g. how to build grounded SMEs

16. Making the FE work better(5) doing more, learning from experiment • Wales is already doing local experiments: in Monmouth or Bethesda in care, in Blaenau Gwent for procurement, Ffestiniog for sustainable community, Swansea High St for social regeneration • Wales can do more: when Welsh Government distributes £1.5 million • But, limits of successful local experiments when good practice often does not travel. • So we will need to back experiments with planned and funded dissemination and learning through new and existing networks

17. Changing how we think and do: new metricsnew politics

18. New metrics what does good look like in the foundational economy? • Old metrics of per capita GDP and GVA frame our understanding by adding up everything according to market value • Two limits • Denies heterogeneity of consumption: wellbeing critical + essential outputs like health care are not like fast fashion; housing and transport etc are inescapable charges on income • Represents regions and places as unitary and suggests that “left behind” places in UK should try harder to emulate the productive success of London and the South East

19. New metrics residual household income and foundational liveability • New metric of foundational liveability = residual household incomemeasured by subtracting essentials like housing and transport • Places are liveable for some households but not for others; according to housing tenure (owner occupier vs private rented vs social) age, one or two incomes, position in the income hierarchy… • Low GVA per capita places like can be liveable for many households if housing is relatively cheap; e.g. Morriston with GVA per capita at 70% of UK, first time buyers can buy a terrace house for £85k when Londoners are paying £430k for their first property

20. New metrics Has London ‘succeeded’ and Wales ‘failed’? • New metrics change the picture: • London is like Brecht’s LA: heaven for the rich and hell for the poor ex unaffordable housing; first time buyer households need income of £89k + £140k cash deposit to buy a £436k property • Wealth effects are as important as income gaps: mortgages buy an appreciating asset with no tax on capital gains; in London 2008-18, the average owner occupier makes an unearned income of nearly £20k per annum

21. New politicsmore citizen participation for trust and accountability • In the past, FE policy was mainly done to and for citizens by experts and politicians; from gas and water to NHS hospitals • Survey evidence shows a majority of UK citizens believe they have little influence over political decisions. • FE policy design for 21st century needs deliberative input from citizens; as in the Welsh Government’s citizens’ jury on care at Swansea • Use new deviceslike citizen assemblies and juries because the Swansea citizens’ jury shows they can make sense of big, complex issues like adult care.

22. New politicsenabling government & foundational alliance • FE is about collective action which requires state action but not government always in a leading and controlling role. • We need enabling government to engage citizens and help build foundational alliances of organisations • Government has legitimacy and tax revenue but like the other actors is not always competent or benign and other actors have much to contribute • In most sectors we want a mixed ecology of provision, including not-for-profits and for-profit firms with suitable business models

23. Conclusion • Foundational economy is about • a new way of thinking and doing which you will hear more about today • a European movement of academics and practitioners as new thinking is taken up • Wales can do this and become a leader • it starts with modest steps and low risk • it builds on Welsh aspirations for wellbeing