(How) could the everyday economy become a transformative idea?

Karel Williams

Blame it on the first-past-the-post electoral system. That system keeps left and right factions contesting each other for control of the Labour party, bad mouthing each other and fighting to marginalise the other’s influence on the party machine. Thus, the Labour Party Conference was mainly déjà vu, as it offered another instalment of intra-party displacement activity from protagonists who could not face the fact that by 2021 both Labour’s left and right factions are proven UK election losers, and both are equally short of good, new ideas.

Hence the importance of Rachel Reeves’ conference speech as shadow chancellor, which proposed a refocusing of economic policy around making the everyday economy work. The everyday economy has a long way to go before it becomes a transformative idea. But, in autumn 2021, it certainly looks like an idea whose time has come. Over the past 18 months, the pandemic has underlined the importance of key workers producing essential goods and services which are wellbeing-critical but were previously taken for granted. This autumn brings multiple everyday crises: rising energy prices, disorganised food supply chains and fuel shortages.

All these developments highlight the Conservative Government’s inability to plan ahead or manage events. No doubt, we will hear much more from the Labour front bench about the ‘Tory cost of living crisis’, because politics is partly (and quite rightly) a blame game. But Rachel Reeves’ speech raises a more fundamental question: what are the constructive, new alternative policies which would make the everyday economy work to deliver a good life for all? Until that big question is answered, voters who blame a Conservative government have no good reason to shift their electoral support to a Labour opposition. 

Unsurprisingly, Reeves did not answer the big question about policies for the everyday in one speech. Instead, she followed the time-honoured conventions of conference speeches by offering a mix of crowd pleasers and policy goodies with one radical novelty. ‘Those at the top’, she said, should pay their fair share of tax, with no tax breaks for public schools, private equity and online giants. There would be borrowing to invest, with billions for new ‘green industries’. The proposed abolition of business rates tax on bricks and mortar retailers was her one radical novelty.

That novelty should not be disparaged, because it would be important for small business. But, from this speech, ‘everyday economy’ is an attractive political trope in search of economic policy content adequate to its ambition (rather like ‘levelling up’ for Boris Johnson). Both are well meaning but in themselves do not advance our understanding of what has to change and how in order that we can make a better world. To that extent, neither trope does any more to change the world than clapping key workers in the first Covid lockdown. Against this background of perplexity about what to do and how, we should recall the history of the idea.

Rachel Reeves originally floated the idea of the everyday economy in a 2018 pamphlet, as a politically accessible way of talking about what academic researchers and Welsh policymakers and practitioners termed the foundational economy. ‘Everyday’ was then for Reeves a way of indicating what matters and displacing thin simplifications about growth and per capita output as the desiderata of economic policy. This transposition of ‘foundational’ into ‘everyday’ was a political communications device which could bring new thinking to mass publics who are not policy wonks and do not engage with the technical language of any kind of economics.  

But the transposition from foundational to everyday comes at some intellectual cost, because it loses a whole series of distinctions which have been made in foundational economy discussion, and which are necessary to effective policy intervention. If we want to make the everyday economy into an object of policy, it is useful to go beyond talking ‘everyday’ for communications purposes and start thinking ‘foundational’ for policy development purposes. That is the pre-condition for breaking with old policy problematics and beginning to formulate a suite of diverse new policies which could fix the everyday for many households as consumers and producers.

Thus, fixing the everyday economy as policy cannot be simply about encouraging more localism in its various current forms, whether that is by Treasury policies of giving city regions responsibility for health and care services or by the Preston model of community wealth building. Foundational analysis argues that essential goods and services are organised into reliance systems. These systems always distribute through local branches and networks, but they are usually organised at central state or regional level.  Multi-level coordinated local, regional and central state policies are therefore necessary to deal with the electricity grid, a supermarket chain or a regional water company.

Equally, the everyday as policy cannot be about raising productivity in a domain of sheltered mundane activities whose importance has recently been discovered by economists who have previously focused on the tradeable, competitive and high-tech sectors. Wages and productivity in the everyday economy are not low across the board, but altogether mixed: consider the contrast between health and hospitality. More fundamentally, labour productivity improvements are of limited relevance in many personal services.  A low-stocks, high-flow car factory brings us cheaper cars, but a high-flow healthcare service brings us worse service, through 5-minute video consultations with a GP and a hospital system without the spare capacity to cope with winter flu. As for wages, the low pay in a sector like care is less about the marginal product of the care worker and more about activity funding and workforce organisation.1

By implication, fixing the everyday is about breaking with existing practice in health or care and many other sectors. But what, then, are the heuristic principles which could guide fixing the everyday?  This heuristic is difficult to think through, because everyday activities are so heterogeneous in terms of ownership, organisation and sources of funding. Here the tripartite foundational distinction between providential, material and overlooked activities is crucial: the distinctive features of each type of activity can provide us with a guide to various points of intervention and relevant policies.

The providential activities of health, education and care are mainly tax-funded and the relevant policies here are tax reforms to increase the revenue fund available to these services (alongside radical but careful reform of service delivery for social value). Because providential activities employ 25 per cent of the UK workforce, their revenue requirements are huge and tax policy has to go beyond platitudes about upper income groups paying their fair share. We need taxes on wealth as well as income, on the understanding that middle income groups with housing assets will also, one way or another, have to pay more. And we need to address the income retention problem that arises for low-income households where more tax plus benefit withdrawal means that a 20-25 per cent wage rise for the main earner can turn into a 3-5 per cent rise in disposable income.

The material activities are largely privately owned and operated for shareholder value and fund returns. These include the privatised and outsourced utility services, along with retail banking and supermarkets, which have ordinarily been in private ownership. Here it is necessary to go beyond endorsing or refusing the Corbynite programme of large-scale nationalisation – which would involve huge expenditures to buy into activities with large investment requirements and operating problems which the state machine is ill-equipped to manage. The starting point is to recognise the limits of the current economics-based forms of regulation, which are too narrowly focused on producer market shares and encouraging consumer switching; far better to start thinking about company and activity-specific forms of social licensing which insist on a something-for-something social contract between government and the large corporate producers operating in sheltered foundational markets.

The overlooked activities again represent a different order of problem. Financialised corporate operators will continue to dominate hospitality. But private equity-financed restaurant chains are in retreat, like all kinds of multiple retailers, so that our high street and town centres have become problems – and places where small independent businesses like hairdressers and cafes are by default playing an increasingly important role. The English practice of allowing the uncontrolled conversion of surplus retail space into rabbit-hutch flats will produce the slums of tomorrow. Far better to have the Scottish or Welsh policies of Town Centres First for new developments backed by controls on edge of town development and reuse. Together these policies could bring health centres, further education colleges, gyms and leisure centres into town centres, with new footfall to sustain thriving independent small business on the high street.

The nature and climate emergency then fits into this three-dimensional frame. The foundational solutions of the last generation form a substantial part of the current problem, when they have led us to operate outside planetary limits. The UK has some of the least energy-efficient housing in Europe, and foundational provision in the form of housing, transport and food accounts for more than half of UK emissions. Here it is necessary to get beyond ‘green new deal’ promises of investment in new industries which will supposedly produce new jobs for displaced workers. Cleaning up the UK involves a shift in the composition of output so that we can have more of all kinds of personal services but less of the high-emission activities. This shift in output which will require behavioural change. It is time to come clean about the difficulty of housing decarb, which involves planning and expert advice as well as grants and loans for householders; or the challenge of planting the right tree in the right place so that large scale afforestation does not repeat the monoculture mistakes of the 1960s and 1970s.

The proliferation of distinctions can easily become an end in itself in academic discourse; professorial careers have been built on discriminating another form of performativity or the new form of capitalism. But, as I have argued above, the distinctions between different kinds of activity in foundational thinking are not academic but politically important – because they are practically relevant to a new policy agenda for fixing the everyday. It does not matter if such distinctions were not recognised in this one conference speech by Rachel Reeves. But if the everyday is to become a transformative idea for Labour, that speech needs to mark the beginning of an effort, with shadow cabinet colleagues and others, to think through a new policy agenda for household liveability within planetary limits through responsible production of essential goods and services.   

Karel Williams is a director of Foundational Economy Research Ltd, a member of the academic Foundational Economy Collective and Emeritus Professor at the University of Manchester.

Notes

1  Julie Froud, ‘How does productivity matter in the foundational economy’, Local Economy, Vol 35 No 4, 2020, pp316-36.