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THE UNEVEN IMPACT OF THE GLOBAL ECONOMIC RECESSION ON PLACES AND PEOPLE: THE ROLE OF

POLITICS AND POLICY

‘40 Years of Policy and Politics: Critical Reflections and strategies for the future’

Bristol, UK, 18–19 September 2012

Richard Meegan, Patricia Kennett, Gerwyn Jones and Jacqui Croft

ESRC Grant Number: RES-062-23-2963

INTRODUCTION• Research project: ‘The Uneven impact of the

Economic Crisis on Cities and Households: Bristol and Liverpool compared’

• Research team (SPS, University of Bristol and EIUA, LJMU)

• Focus here on policies and politics• Argument:

– recessions ‘pressure points’ exposing and testing political positions – politics and policies - and their underlying economic theories

– local responses conditioned by national-local state relationships

– local context conditions national policy

40 YEARS – 4 RECESSIONS

1. Mid-1970s: ‘last gasp Keynesianism’

2. Early 1980s: Neoliberalism - monetarist experiment tried and failed

3. Early 1990s: Neoliberalism ‘post-Lawson boom’

4. Late 2000s Great (‘double dip’) Recession – Keynesianism revisited or ‘strange non-death of neoliberalism’ (Crouch, 2010)?

40 years - four recessions in the UK GDP annual % change, and

Unemployed Persons, Aged 16 and Over, 1971 – 2011

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2011

Q3-

2012

Q2

Une

mpl

oyed

per

sons

GD

P %

cha

nge

GDP annual % change Unemployed Persons

Last gasp Keynesianism

Neo-liberalism/ monetarist experiment

Neo-liberalism/ post-‘Lawson

Boom’ recession

Great Recession: Keynesianism re-visited or ‘strange non-death of

neo-liberalism’?

Conservative Labour Conservative – Liberal Democrat Coalition

The four post-war recessions in the UK: GDP annual % change, and UK public spending as a % of GDP, 1971–2011

0.0

10.0

20.0

30.0

40.0

50.0

60.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2011

Q3-

2012

Q2

2012

2013

2014

2015

2016

UK

Publ

ic S

pend

ing

as %

of G

DP

GD

P %

cha

nge

GDP annual % change UK Public Spending as % of GDP UK Public Spending Forecast

Last gasp Keynesianism

Neo-liberalism/ monetarist experiment

Neo-liberalism/ post-‘Lawson

Boom’ recession

Great Recession: Keynesianism re-visited or ‘strange non-death of

neo-liberalism’?

Conservative Labour Conservative – Liberal Democrat Coalition

UK Net Borrowing £m (excl. financial interventions) 1971-2011

-40,000

-20,000

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Net

Bor

row

ing

£m (e

xcl.

finan

cial

inte

rven

tions

)Conservative Labour Conservative – Liberal Democrat Coalition

DIFFERENT POLITICAL & ECONOMIC INTERPRETATIONS OF CURRENT CRISIS

• 5 groups (Gamble, 2009)– ‘Market Fundamentalists’– ‘National Protectionists’– ‘Regulatory Liberals’– ‘Cosmopolitan Liberals’– ‘Anti-Capitalists’

• Contested theories– ‘Freshwater’ versus ‘saltwater’ economists– Orthodox vs. political economists (Marxist and

Green)

DIFFERENT POLITICAL & ECONOMIC INTERPRETATIONS OF CURRENT

CRISIS/2

• Neoliberal politics/policies tested to destruction - with Great Recession administering coup de grace?

YET

• ‘Strange non-death’ (Crouch, 2012)

POLICY RESPONSES - EU

• ‘Regulatory liberal’ • Combination of:

– financial stability measures– fiscal consolidation programmes– structural reforms “to boost smart, sustainable

and inclusive growth” (Europe 2020); and, increasingly

– reinforcing economic governance• overriding imperative to tackle sovereign debt

issues in Eurozone (UK ‘outside looking in’)

• concerted inter-state political response different to 1930s’ national protectionism

POLICY RESPONSES – EU/2

Within EU (Davies et al, 2011):

• 3 main categories of national government responses – support for the financial sector and system – monetary policy – discretionary fiscal policy

• in some cases fiscal and monetary policy interventions combined with cuts in public sector expenditure and social welfare

POLICY RESPONSES – UK UNDER LABOUR (Third term - 2005-2010)

Interventionist and regulatory (with some Keynesian overtones):

• nationalising banks/ regulating financial system (e.g. one-off levy on bank bonuses)

• bringing forward capital investment projects • jobs initiative for young people (‘Future Jobs

Fund’)• vehicle scrappage scheme• monetary policy - ‘quantitative easing’ and

support for Bank of England’s decision to lower interest rates (to lowest level for over 300 years)

• fiscal policy - including temporary reduction in VAT and new top rate for income tax

POLICY RESPONSES – UK UNDER COALITION (2010 -)

Market fundamentalist, neo-liberal: • policy focused on reduction of government

borrowing deficit (from recession peak in 2009 of just under 48% to 39% by 2016)

• public spending cuts • monetary policy: continued quantitative easing

and support for low interest rates• fiscal policy: increased VAT and personal

allowances for income tax, reduced Corporation Tax, with top rate for income tax to be reduced next year

• austerity versus growth

SUB-NATIONAL RESPONSES – EUROPEAN CITIES

URBACT SURVEY (Guidorn et al, 2010) - 130 cities/ 24 European countries

• 70% had implemented measures of some sort

• 4 key factors influencing response: – national context – degree of decentralisation and financial

autonomy – legal power of cities to act – national and local political expectations of

cities’ role

SUB-NATIONAL RESPONSES– UK CITIES

Degree of decentralisation and financial autonomy/power of cities to act been important

•1980s recession: combined with uneven spatial impact produced polarised local government responses (Gordon et al, 2009)

• e.g. Liverpool - laid ground for ‘Militant’ opposition to Thatcher government/ public spending cuts

•coincided with reductions in local government power reflected in urban policy

• e.g. Liverpool got Development Corporation

SUB-NATIONAL RESPONSES– UK CITIES (2)

1990s recession

• interventions limited by local tax reform and rate capping

• lobbying of central government for partnership role and ‘challenge’ regeneration funding programmes

• e.g. City Challenge: Liverpool got it, Bristol tried and failed

SUB-NATIONAL RESPONSES– UK CITIES (3)

Current recession •Mix of measures using central government funding and more locally designed ones implemented and financed by City Councils, RDAs (RIP), URCs/EDCs

•Currently: balancing act mitigating impact of public spending cuts and exploiting ‘localism’ growth agenda in context of dismantling of regional economic development architecture

SUB-NATIONAL RESPONSES – UK CITIES: BRISTOL & LIVERPOOL

Bristol• spending cuts - some cuts passed on to voluntary

sector but less than Liverpool • West of England LEP & Bristol City Deal• elected Mayor (following referendum)

Liverpool• massive cuts in spending – exacerbated by loss of

area-based grants/ protecting core services – but reductions in others

• some cuts passed on to voluntary sector -impacting ‘Big Society’/ pulls out of ‘Big Society Vanguard Areas’

• job cuts (voluntary to date)• Liverpool City Region LEP and City Deal• elected Mayor (without referendum)

SPENDING CUTS - LIVERPOOL

“... we’ve been hit the worst of all the core cities, or, indeed, the worst in the country, for two consecutive years. The principle reason for that... is that they’ve taken most of the funding cuts from lines of funding that were allocated towards deprivation. So, I mean, putting it simply, the Tories regarded it as funny money... so that meant that the cuts are spread very unevenly and, effectively speaking, the more deprived you are as a local authority, the harder you’ve been hit”(Local councillor, Liverpool, February 2012)

 

Cuts in Spending Power vs. Indices of Deprivation

‘BIG SOCIETY’? - LIVERPOOL“In 2009 we laid off about half a dozen people and at the beginning of this financial year [April 2011] we laid off 60% of our staff... 34 people out the door.... If the City doesn’t have the money and we’re not saving babies, then we’re not going to be a priority. And lots and lots of organisations found themselves taking cuts. And some are being told ‘Well we want a 7% plus reduction year on year over the next four years’. Well that means 7% over four years, that’s surely getting on for a 30% cut in your prices. Who can cut their prices by that when the service is 80 to 90% human labour?” (Chief Executive, local voluntary sector organisation, September 2011)

CONCLUDING COMMENTS

• Recessions test political positions and their underpinning economic theories

• Neoliberalism been tested in the UK and failed but ‘strange non-death’? Current government’s economic programme and in the debates it has provoked over ‘austerity versus growth’ testify to this

Local responses conditioned by central-local government relationships

CONCLUDING COMMENTS (2)

• Bristol and Liverpool as examples of local policy response:

from ameliorative measures for businesses and households to coping with public spending cuts and ‘localism’ growth agenda:

ocuts hitting Liverpool particularly hard

oVCS also being hit in both cities – undermining ‘Big Society’?

o ‘City deals’ – and Elected Mayors - in both