Why we need a new experimental, place-based economics to address Britain’s growing gulf between rich and poor.
In my Guardian article today I argue for a new experimental, place-based economics to address Britain’s growing gulf between rich and poor.
But this is not just an opportunity for a divided UK. A rising tide that, instead of lifting all boats, pushes many beneath the water line, is becoming a crisis of global proportions. That’s why the World Economic Forum declared widening income disparities this year’s second biggest mega-trend.
It was No.1 in North America, propelling Bill de Blasio to the Mayor’s office in New York and forming the backdrop to President Obama’s recent State of the Union. Inclusive economic growth and inclusive innovation are the new watchwords of global policy discussion.
The geography of poverty – from inner-city slum to backwater periphery – is often ignored. But many places and people simply need a hand in moving from being locked-out to being linked-in. The ‘enduring neighbourhood effect’ that helps reinforce inter-generational poverty, as Robert Sampson found in his multi-decade study of Chicago, consists partly in the connections you have versus those you lack. Digital startups, like the London-based social network Backr or the Indian mobile portal Babajob, can pierce these invisible walls, by bringing word-of-mouth opportunities to the previously uninitiated.
But what works in one place may not in another. Conditional cash transfers (CCTs) – paying people money on condition they help themselves – the pioneering Poverty Action Lab at MIT has discovered through randomised field trials, was key in getting more parents to send their kids to school in Malawi but in Morocco unconditional payments worked equally well. A home-grown poverty lab should find out where CCTs could work for us.
Some of the ideas of the new ‘activist economics’ – like Nobel laureate Paul Romer’s Charter Cities or, its left-ish alternatives, Jeffrey Sachs’ Millennium Villages and the Scottish co-operative new town named after Robert Owen tipped as a possible winner of this year’s Wolfson, the world’s second biggest Economics Prize, may appear decidedly Utopian. But if they’re appreciated for what they are, not blueprints but living labs to learn by, then they could be templates for a new experimentalism. Tradable local currencies that allow local economies to devalue? Helicopter money for the poor? An economic impact bond that pays out dividends if an income gap is narrowed? The real limits to inclusive growth may yet turn out to be the ones we’ve placed on our own collective creativity.