From Spend to Investment

Over the last 30 years the Anglo-Saxon world has adopted the most disingenuous of economic systems. Under the guise of capitalism for all, we have produced monopoly benefits for the few and wage serfdom for the many. Via an undue focus on nominal speculation rather than real investment, an extraordinary amount of wealth has been generated by capital and exchange rate arbitrage, but rather than trickling downwards to nourish the real economy this wealth has leveraged upwards further enriching the already wealthy and pricing out of the investment market all those who cannot amass such advantage.

As such we have produced a rentier economy of capital which licences out debt and borrowing to supplement those whose base wages can no longer sustain a decent standard of living. Hence the growing indebtedness and increasing insecurity, not just of the poor but the middle and professional classes. As suchincreasing numbers of people are denied the ability to truly own, trade and prosper. In 1976, excluding property, the bottom half of the UK population owned 12% ofthe marketable wealth; by 2003 that had fallen to just 1%. In the same period, the share enjoyed by the top 10% rose from 57% to 71%. Even when property is included, the bottom half of the population still only owns just 7% of the country’s wealth. A really free market requires that people have something to own and trade. In the rentier economy of monopoly capitalism, the price of debt and the price of access to capital keeps rising and the barrier to real market entry for those without wealth and capital climb ever higher.

David Cameron recognised all of this and spoke at Davos earlier this year of the need to recapitalise the poor and create a capitalism that works for all. The key political aim of this truly transformative conservatism must be the generation of an asset effect for the de-capitalised bottom half of society. In Britain today, the poorest quarter of the population own less than 1 per cent of the UK's total assets. To be poor is not simply to be without income but to be without the assets necessary to have a meaningful stake in our capitalist democracy. Assets determine a person's ability to plan, to invest and secure a future of their choosing. Assets must, however, come from somewhere, and since redistribution and expenditure via the state has such a poor record in alleviating dependency, a fresh approach is required.

It is right to provide a floor through which people cannot fall, it is right to have a safety net which catches and supports people who for reasons of health, wealth or market fluctuations cannot support themselves in the interim. But we know that welfare is a far more effective ceiling than a floor – it traps as many as it helps and condemns a whole section of our nation to poverty and dependence. Welfare disempowers its recipients – with its underlying philosophy of entitlement without reciprocation, it fragments working class culture and permanently disables the associative drive that can alone create communities and foster wealth and independence. I would argue that in order to escape from this broken and failed agenda, UK welfare expenditure should move from a spending to an investment model. The aim must be to free the poor from welfare subsidy through the generation of asset independence. How might this happen? There are many ideas, of which I present just three here:

• Create a community right to buy. Allow local community groups to register an interest in a local eyesore, decrepit building or abandoned or ill used facility, be it privately or publicly owned. For a fair market value, such legislation can allow local social enterprises six months to put together a funding package to turn a liability into an asset for a transformative local business and produce for its original owners a sale and return that may well not have occurred otherwise.

• Scaling up of employee share ownership and the extension of legislation governing management buyouts to workers and social enterprises. If we had a model that provided capital grants and investment credits to good businesses that could be saved by their employees – this in part could be supplemented by the savings generated through avoiding the costs of unemployment and local economic collapse.

• And as the Create Consortium have argued, a Community Allowance to bridge the administrative nightmare that is moving from benefits to part-time work, while simultaneously building community cohesion and constituting the social capital that is the ground for the utilisation of real investment and real return.

All of the above ideas offer a real opportunity to address the contemporary asset deficit and convert an ideology of ownership into a practised and fully participated reality. Let me hope that the vision and principles embodied in the Community Allowance and initiatives like it can grow and influence other areas of our policy and practice. It is vital that we put wealth back into the hands of the poorest so they can not only lift themselves and their families out of poverty but keep themselves there as well. We won’t do that through the old approaches of shuffling state money around to subsidise income benefits that only reinforce the culture of dependence. Through decentralisation, innovation and the return of savings engendered by success to those self-same communities we can provide capital investment in our poorest and most deprived areas and we can succeed where old-fashioned top- down supplementary welfarism has failed.

This article first appeared in "The Community Allowance: A Step up for People and Places" by CREATE Consortium