Foundation Regeneration Economics.
Problems in Wales: Persistent Poverty, increasingly regionalised, with a feeling of inevitability and acceptance.
The Question: What can Plaid do about this, and where is the opportunity for Plaid to forge a clear path to power?
Despite a seemingly endless cycle of half-hearted macro-economic recovery schemes delivered in various ways (including investment in business ‘Hubs’ across Wales from schemes delivered by both the Welsh and UK Governments), our urban and rural communities are still gripped by poverty. In Wales we see levels higher than anywhere else in Northern Europe, re-enforcing the social deprivation this brings. There is still a feeling of acceptance that this is our lot. This lack of hope of real opportunity for our young drives down ambitions and innovation. Brexit, Global warming and COVID-19 just exacerbate an already dire situation.
However, there is always a silver lining if we look hard enough, especially if we rewrite the rules. Plaid can be the party that enacts real change, creating new rules and economic growth to sustain an egalitarian society. We do this by growing our economy organically from the grassroots up, ensuring that the wealth creation is focused directly at the source of poverty. This wealth is then directly incorporated into the base level economy. If we provide a clear path to economic growth in Wales, we will end the downward spiral.
Plaid will be seen as the party that delivers economic success for Wales. As we build our economy, we then build the economic foundation for an egalitarian and fair society. This Foundation economics with a ‘Welsh twist’ is just the start of this process, but without it, the back of the Welsh economy will always remain broken and dysfunctional. The path to creating functioning and thriving local economies in Wales involves a practical and pragmatic approach we can enact now. This in turn will give us substantial social and financial returns (approx. £4·5billion per annum) with virtually zero cost. If done properly, it would set a new economic and social path for Wales. This is how Plaid can construct a core ‘Social Contract’ within which we will define our future economy and society. It’s a centre radical path, joining business with social well-being, a path that neither Labour nor the Tories can tread. As we achieve social and economic transformation and revitalisation, we also reduce our carbon footprint: this is a truly a green solution.
The current problem is also ‘Our’ biggest opportunity –‘Foundational Regeneration Economics’.
Wales has a deeply entrenched chasm of expenditure capital deficit, created by centralised Westminster government, leading to ‘extractive economics ’ designed to extract capital, resources and soft and hard assets, as well as job extraction and forced economic migration of Welsh people. This overall deficit can be broken down into two sub-categories:
- A deficit in ‘Investment capital’: the lack of large-scale infrastructure results in an incomplete and dysfunctional infrastructure, thus a stunted economy. We cannot solve this without additional money from Westminster or greater fiscal devolution, neither of which will come soon.
- A deficit in ‘expenditure capital’: money which is spent daily on goods and services is extracted out of Wales. The vast majority of major providers of our goods and services currently being contracted in Wales, from infrastructure to finance, are based outside of Wales (usually in and around London). Their highly-skilled employment opportunities and graduate schemes attract both money, resources, skills and talent away from local communities to a Welsh skills exit - leaving Wales’ towns, cities and rural areas with scarce opportunities for their own social or economic growth.
Consider a typical £100 that you spend. What does that go on? Where does that money end up? The answer is across the bridge, deflating the Welsh economy like a balloon with a slow puncture, limp and deflated. Because we are one of the few economies in Europe without a functioning base level economy, the effects of any future macro-economic injection of capital into Wales would be diminished. The money multiplier effect in Wales will be very constrained, with leakage to South East England.
Repairing these base level economies is a prerequisite to the successful use of Keynesian economics, and in addition could set the tone for all future economic and social policies.
Repairing our local economies can be done for very little cost, but massive financial benefit (circa £4·5 billion per year to start). We can ‘rewrite the rules of the game’ to provide a distinctly Welsh flavour to our economic policy to make it fit Wales. We can ensure that it works with a real egalitarian edge, building up our economy from the bottom up, creating new jobs embedded in society, and creating a real sense of ownership of communities by residence.
To make Foundation economics work properly it necessitates a ‘Social Contract’ between Government, business and people. The social contract is ‘the key’. For us, policies would be pragmatic and Wales’ focused. Most importantly, they will be local, green, and resilient. These can be started with no recourse to Westminster, but with the knowledge that the additional benefit of the ‘multiplier effect’ will increase as the economies are more resilient and interconnected.
The urgency of the issue
Foundation economics is a tried and tested strategy: we need look no further than Preston, a Labour-led council. Despite its success, the Labour Government lacks both the guts and the vision to deliver this policy in partnership with local businesses. Plaid must establish itself as champions of this playing field before the chance is lost.
Within every crisis (and do we have one) lies an opportunity for transformation for those brave enough to seize it. Plaid Cymru can overhaul its credibility and image, at no cost and with everything to gain. Plaid must prepare Wales to stand on the international stage, through a pragmatic vision for social and economic transformation. That vision could be termed: ‘Foundational Regeneration Economics’, based on egalitarian economic principles (drawn from the best of Scandinavian/German/Japanese social and economic practices), creating a society and economy where government, business and individuals work together. This coherent interwoven social and economic model and principles will be geared specifically to Wales, working at grass-roots level, directly lowering poverty, increasing productivity, health and education levels, and allowing for real economic alternatives to build up at the community level.
The solution: ‘Foundational Regeneration Economics’- nationally scaled up.
Our proposed solution marries social justice with healthy local economies, complementary partnership, and thrives through constant communication between anchor organisations such as the Welsh Government, Universities, privately owned local businesses, and consumers. It has been defined by the two leading thinkers behind Community Wealth Building, Marjorie Kelly and Ted Howard of The Democracy Collective, as “a coherent paradigm for how to organise an economy” which could allow us to transcend the currently unequal and “neo-liberal” economic model. (Please see attached Preston model)
Based on the principles of a ‘Social Contract’ with equal rights and responsibilities, this could be scaled up nationally and not just a local level, creating a whole new dynamic. A central government could bring along the added options such as the development of a Bank of Wales. Bringing the three constituent parts (government, business, society) in the social contract together at a national level will bring a huge vigour to the economic impact by upscaling and utilising our resources to best effect, and for Wales – not just the SE of England. This would open a vast door of opportunity for alternative, egalitarian and progressive business models that could be created at community level, bringing green, clean and productive egalitarian options. These alternative forms of production would have a much higher chance of long-term success as they would not be reliant on the erratic provision of funds from Westminster.
At a national level:
1.Welsh Government (Senedd down to Councils) needs to:
To put society first and foremost, that we as politicians are only the caretakers of our country. We need to define, in writing, our obligations and responsibilities to society (a written constitution), walking an egalitarian economic path e.g., as seen in Denmark.
To support local business at every opportunity and to ensure that no business in Wales suffers due to the distorted procurement policy set by Westminster that will always favour its interests.
To create a strong close working relationship with business, based on a ‘confederation of Welsh businesses’ created to allow government and business to work together to increase productivity. For example, in Swansea, this requires the advanced Tidal Lagoon project to be designed, built, owned and run by Wales, including the distribution of the electricity to households. Infrastructure and supply profit should be shared and enjoyed by the people of Wales.
We should look to adopt some of the best working practices from around the world, and embed them in law, including a member of staff on the board of directors and shared ownership schemes for staff. There are many options that increase productivity and democracy for people, business and Wales.
- Business needs to:
Realise that we would support locally owned business on the condition that business must be embedded into society, and to adhere to labour and environmental laws that would be set at a high level. The Preston model has shown that this carrot and stick approach works when used wisely and for a defined purpose, and that business realises their productivity gains are all based on well-paid trained and motivated staff. This would cement their association with their government and society. There are few countries in the world whose businesses are excluded from its main market, the government. In Wales this is over 40% of our economy.
3.Individuals need to:
Realise we all have ‘rights and responsibilities’ in equal measure. We are all part of society.
As a practical example of this, Denmark has abolished ‘Unemployment Benefit’, and created ‘Employment Benefit’. With one policy change, the dynamics of society changes. There is no unemployment for anyone that is able to work. This starts off the repair of broken communities and people’s lives. Although hope has been lost, we can break the cycle especially in areas of inter-generational unemployment.
For those made redundant ‘Employment Benefit’ would kick in, controlled locally, and worked in conjunction with local businesses. It would funnel people through areas with employment skills shortages in their local communities. An alternative is given for retraining and employment with a local focus. The Danes call it ‘Rights and Duties’. This creates the high-level base for welfare protection, and simultaneously increases productivity. The Danes accept that one person’s problem is also society’s problem, but at the same time insists society’s problem is also that of the individual.
This approach involves a hybrid of multiple strategies which focuses on Community Wealth Building, evolving them to harness the massive economic potential wielded by Government. Coupling this with a lifetime of practical, hands-on business experience based on pragmatism not dogma leads us to a truly revolutionary social model: a functioning ‘Social Contract’ that lies at the centre of both business and society. It is green, egalitarian and from grassroots up, benefiting those most in need.
Building an economy is like building a house; there needs to be a solid foundation. We are proposing the general principles of ‘Foundation economics’, but upscaling them and extending them to a national level. Here, they can take on a whole new dimension that could direct national, social and economic policy. This could be started immediately as we take power, with little cost. It has a huge economic impact and will set the groundwork for when Wales has further economic powers at its disposal, making their impact increasingly effective.
Our version is the Foundational Regeneration Economy: It’s a Welsh regeneration scheme to attract and keep investment. It's not simply a buy-local scheme. It is a structural overhaul which cements and reinforces the economic benefit of every single economic transaction that does, can and should take place in a local area, by utilising anchor organisations to their full potential.
Our vision is ambitiously egalitarian as it is modelled on successful Scandinavian models. This means the Foundational Regeneration Economy is designed to benefit lower-paid workers and residents as much as the highly skilled ones. This means that regeneration is not simply disguised gentrification: even if the cost of living in an area rises, locals themselves will have more money to spend, and should still be able to afford to live in the area as they could previously. Their quality of life will be drastically improved. It benefits the entire society from employee to business owner: nobody is left behind, everyone is included.
By setting our political stall as the ‘middle path’, neither left nor right, but with tried, tested and pragmatic economic policy geared to the specific needs of Wales (pulled from the best practice of other countries), we will appeal to those disaffected voters on all sides.
This is a cure for post-colonial economies. It is a flexible solution which can fit the needs of Wales. It changes the rules of the game and would re-define our society in stark contrast to that of England. Plaid would sit as the gateway to a prosperous, egalitarian, green Wales.
John Davies Yasmin Zahra
Senedd Candidate (Gower) (Youth Officer Gower)