Towards a post-Covid Meadean economy

Building on this post, I have been working at local level to develop a coherent response to the economic meltdown facing the area.

Clearly, any such response is set in the context of continued underfunding from central government, and the collapse of many of the income generation schemes they have had to devise in order to keep providing services over last ten years.

Fuller technical details are available to those in other council areas, and Labour MPs who are genuinely interested, but in essence the proposals as they stand are as follows:

1. Drawing on reserves initially, we will work with a new Community Benefit Society to set up an ‘equity deal’ scheme for businesses that think they may go under, given lack of consumer or supply chain demand and after the furlough scheme ends. The principal target for the scheme offer will be town centre-type businesses, especially hospitality and leisure, both because these businesses are most likely to see slower return to normal trading conditions and because of the domino-effect of shop front vacancies in a town centre, where some vacancies and the feel of emerging blight drives custom from the town and creates more closures. Businesses entering the scheme will also be those who, for a variety of reasons, are unable to access the treasury-backed loan scheme.
2. The council(s) will inject cash into businesses with normal time underlying profitability, so as to keep them afloat through the bad times, and in retirn for shares. Importantly, the equity deal will include a ‘buy back’ clause for owners, so that when trading conditions allow they can buy back total control, at a price which reflects council input, but is reasonable and even encourages same.
3. To bolster both financing and community-wide ownership (and with that local custom), we will offer a Financial Conduct Authority regulated community shares scheme, allowing local people with disposable income to invest in the overall programme, and within this a democratic framework will be established whereby decisions on where and how to invest, and with what conditions generate wider participation.
4. Conditions for equity deals are likely to involve commitment to a range of social and environmental measures, such as retention of jobs, trade union representation, participation in town-wide green schemes, and there will also be encouragement and facilitation to engage — as supplies or purchasers — in business activities which meet community wealth principles.
5. Concurrently, there will be a campaign to demand councils get wider access to funding than is currently feasible under the Prudential Code, by seeking enlarged parameters to access to the Public Works Loan Board, and by loosening expectations of balanced budgets (and related Section 114 legislation), in line with the need to meet local economic need and demand.

Reflecting on these proposals over the weekend,. I realized that they constitute a sort of bottom-up Meadeanism, as reflected in Martin O’Neill’s & Stuart White 2019 paper James Meade, public ownership and the idea of a citizen’s trust.

Very briefly, economist James Meade’s proposes an economic system run on the following basis (as summarized by Martin &Stuart):

The overall picture is of an economy with some features of capitalism. The market remains as the main mechanism for the co-ordination of production. There is also widespread ownership of assets. But in key respect, this is not a capitalist society. for one thing, ‘worker’ and ‘capitalist’ are not so much distinct social classes as roles that most, if not all, citizens occupy to some degree…..Second, altogether the state does not plan production, it owns a substantial share of society’s assets....”

Now, Martin & Stuart wrote this paper at a time when Labour under John McDonnell’s direction were proposing something not to different from Meade’s citizen’s trust idea. That hope at a national level has been dashed for now. Strangely, though, the current difficult circumstances make it possible to trial Meade’s ideas at a local level.

Certainly, the question , central to Martin and James’ paper of how assets from a localized citizens’s trust will be distributed, will not be answered — revenues from shares will be non-existent to low in the first period, and even later such revenues will need to go straight into maintaining existing public services for the remainder of this parliament.

Nevertheless, there is a real opportunity to test the democratic credentials of a citizen’s trust vehicle, and to see, in a live experiment, the extent to which private businesses actually embrace business partnership (such that they do not avail themselves of the buy-back clause) with a public sector which still retains, even now, a good deal of expertise and knowledge, not least in why and how firms can integrate supply chains and punch above their collective weight for the local economic and social good.

The challenge in the meantime is to engage the Labour PLP and other local authorities, including the very big and powerful ones, in bringing their relative financial and lobbying muscle to this aspect of the ‘build back better’ programme, in a way which bypasses Tory government as necessary, but makes legitimate demands where possible.

In so doing, I suggest the proposals provide a coherent contribution to James Meadway’s call for a ‘smart response’ to the Tories’ emerging plans to allow national debt to rise as a means of delivering further inequality. as well as offering a concrete way of moving forward on Anthony Painter’s & Matthew Taylor’s proposals for transition (no. 2 on worker support and no.4 on development of an asset base).