Recovering the Economy

Listening to the various party conferences you would think that the politicians THIS time have learned the lessons of boom and bust and are now going to revamp macro-economic policy, remake the relationship between state and citizen, write off large chunks of eurozone debt and lead us into a brave new world of social justice and prosperity.

Yeah! Right!

Because the truth is that any levers that the politicians have in a modern market based economy are generally pretty ineffective.  They may pontificate about grand capital projects like high speed trains, tramways, arenas, flood defences and so on, but this is pretty much a combination of political posturing and feeding the professional and financial beast which we call the ‘regeneration industry’.  I sometimes think that ‘Degeneration Industry’ would be a more accurate moniker.  As this refreshingly honest trader put it, ‘Governments don’t rule the world: Goldman Sachs do‘.

Recovering the economy is not primarily a function of politics, but a function of enterprise.  About people using their skills and knowledge to provide products and services that people want, marketing and selling them effectively at a price that adds value to the customer and makes a profit.  Transactions in which all parties gain. Good business if the methods of production and distribution are environmentally sustainable and neither harm nor exploit.

But, improving the economy through enterprise is not the only thing that matters.  We also need to improve our communities, making them better places for as many people as possible to live full and rewarding lives in which everyone who wants to is supported to explore their potential and express it to the full.  And, these are not 2 distinct activities but 2 facets of the same process of development.

The challenge is not to find the right ‘macro-economic policy’ but to engage large numbers of people in living their lives to the full and doing what they can to help others looking to do the same.  It is about mass engagement, facilitation of ideas, and support.

You see the politicians can’t build good communities and sustainable economies.  We get these things as by-products of large numbers of people pursuing the projects that they believe in and helping each other wherever they can.  And occasionally falling out.  Great communities and their economies spring from people living their lives to the full and making the best of their potential.

It’s about time we recognised that and helped to make it happen.

Governments don’t rule the world; Goldman Sachs do…

Unexpected candour on the BBC from this stockmarket trader….

Gordon Gecko is alive and well.  Or have The Yes Men struck again?

And, worryingly, does it matter….

The Leeds LEP Summit…

Last Friday, 700 people descended on Saviles Rooms in Clarence Dock, Leeds to attend the Local Enterprise Partnership’s Summit on Realising the Potential.

I wish I could say it was a day full of surprises.  Of innovative and critical thinking.  Of real insights about how enterprise works in the region and beyond and what can be done to make it work better.  I wish I could say that we were listened to, engaged, given the chance to shape, not only ‘The Plan’ but also how it might be put into action.  But I can say none of these things.

It was the usual formula of a stage sequentially inhabited by a series of be-suited folk advocating their politics, or their research, or in some cases their business interests.  But generally, far too much politics and macro-economics, a sprinkling of economic development orthodoxy (clusters, sectors, high growth) and hardly any enterprise at all.  And where differences in ideology or strategy were clearly apparent there was no attempt at analysis or synthesis. It just came down to ‘we’re in charge now – so we’ll do it our way’.

The importance of SMEs was mentioned several times, but they were talking about 10+employee, high growth startups willing to put together funding bids and set up KTPs (knowledge transfer partnerships) with universities.  The kind of startup that allies itself with the economic development infrastucture and pursues every penny of public funding that it can.  There was little to no indication that anyone had given any thought to the potential of the regions enormous number of micro-enterprises and the fact that these are the hot bed from which the higher growth businesses will over time emerge.  We are back to what Drucker called ‘wanting the top of the mountain without the mountain’.

The implicit assumption was the regional economy would remain one based on traditional models of ’employment’, a white and blue collar region rather than a region where large numbers of self organising free agents contributed significantly.  What kind of employer skills board is going to define the skills and attitudes needed to escape employment by others but actually shape your own portfolio of work?  No, as per usual there was much discussion of what ’employers’ are looking for and the importance of that Holy Grail of employability.  As I said on the day, I don’t want the net result of 2 decades of education for my daughters for them to be merely ’employable’.  I want much more from the system than that, thank you very much.

It was also assumed that growth in the economy IS the only future.  And we seem to have the choice of whether we measure it using GVA or GDP.  No mention of the possibility, never mind the desirability, of a steady state economy.  Or perhaps measuring progress in terms other than purely financial expansion.  In fact nothing that wasn’t about mainstream economic development policy.  Nothing that we were not discussing in Mandelson’s White Papers on Building the Knowledge Economy at the fag-end of the last century.  Those of us with alternative ideas about to make the world a better place need to take a long hard look at ourselves – because our messages are just not getting through.

Somehow we were soon well behind the clock and time for questions from the floor was cut.  Not that it would have mattered.  If you really want to listen, you do not dominate proceedings from a stage and  give 700 people in the audience a couple of roaming mics.  You take the challenges of helping people to find their voice and express themselves a little more seriously than that, you build it into the process. If you really want to listen.

I had tried to encourage a few small business people to attend and others with an interest in ‘the economy’ who do not see themselves as ‘in business’, because the future of our economy should not be left to a partnership between business folk and politicians!  Sadly most had left within the first couple of hours as they heard nothing that spoke to them of their goals, the contexts they are working in, or their aspirations and they felt the dice had already been thrown, and that the strategy had been set for yet more capital investment and a preoccupation with high growth companies in high growth sectors.  All I could do was mouth my apologies as they picked their way out of the hall while speaker after speaker talked of engagement with ‘the business community’.

At least we had the back channel of twitter to contribute some different views.  Not that the screen displaying the twitter stream was legible and it took until lunchtime for the inimitable @johnpopham to explain that if they used twitterfall they would not need to keep hitting refresh……  I can’t help but think that something so apparently trivial as understanding twitter may hold the seeds of something important for the LEP in recognising that tomorrows economy will not be the same as yesterdays, only bigger.

So, we were late into our breakout groups.  The one I attended was like a fractal of the main hall.  A stage, a panel, an audience and not enough time to do the subject justice.  But this time there were some women too!  At least one of the panel members talked passionately of the LEP needing to speak the language of micro-enterprise!

Lunch was good.  Soggy sandwiches.  Fruit so cold it hurt.  But at least WE got a chance to talk…..

After lunch it was back into the main hall to listen to more clever and/or opinionated men (I would have been at home on at least one of those counts).  One of these had some thing to say about the drivers of regional growth in OECD countries and how some ‘basket case economies’ had managed to turn things around.  I can’t think why he would choose to provide data on basket case turnarounds in our region, can you?  Sadly the slides he presented were unreadable and I could not follow the plot.  I was so angry!  We jet in a researcher from lord knows where, presumably at great expense to the sponsors and then we don’t make sure that his slides will be legible to any but the front rows?  So I bailed out to the LEP Conversation Corner which was deserted to begin with, but which did eventually yield some fascinating conversations!

What did surprise me was the number of attendees who seemed to think that the gig was OK.  That it had ‘gone well’.  That any dissenting or challenging perspectives on twitter were just negativity rather than the result of any critical thinking, or different perspectives that may be worth exploring.

I found it genuinely puzzling until I realised that this was the congregation of the church of orthodox economic development – at prayer.  Where GDP is all that matters, and green/culture/tech/creative is only good IF it will create yet more economic growth.  This was the economic development supply chain in the room.  Hardly likely to be open to the possibility of radical innovation when they have so much vested in the status quo.

A Compass for LEPs…

LEPs are of course Local ENTERPRISE Partnerships.

But enterprise cannot be developed without full attention being paid to its wider impact on nature, society and personal health and well-being.  David Cameron has talked more than once about economic progress needing to be balanced with progress in well-being.  Pursuing the growth of GDP outside of this wider social context would seem to be a fool’s errand.

An enterprise policy that grows GDP, but increases illness or is not environmentally sustainable or increases inequality in our society may not be a good thing.

So, how about developing a simple compass that can form the basis of a practical evaluation for new enterprise proposals?  I was very taken by this simple framework that Danone use when evaluating their innovation projects…

N = Nature – will the development respect natural limits?  Is it environmentally sustainable?

S = Social – will the development lead to improvements in society?  Fair wages, good governance, increased equality, better access to finance to all  etc.  Will the goods and services produced enhance life in our communities?

E= Economic – will the project work economically? What payback periods are we looking at here?  How can we encourage doing the right thing even when payback periods may take longer than usual business conventions would allow?

W= Wellbeing or health – the Danone mission is to improve health for the greatest number of people through food.  If the project does not fit the mission then it will not move forward.

A Plea to LEP Board Members

Do you ever question the belief that more economic growth is the only route to recovery?

That we can consume our way to a ‘better’ future by simply consuming more stuff, more quickly?

Do you ever consider that perhaps it is time to at least be open to the merits of leading in a different direction?

I am neither anti-capitalist, nor anti-growth but recognise these are double edged swords rather than cure-alls.

Working with Danone recently they introduced me to their compass test of business development, where any change has to meet the challenges of the four compass points.

  • N = Nature – can the proposed development be sustained in a one planet scenario? Does it fit with the laws of nature?
  • S = Social – will it lead to a socially just and improved situation?
  • E = Economic – will we see a return on investment? Usual investment and payback protocols apply and can be flexed
  • W = Wellbeing – will the proposed project increase health and wellbeing for the most people

Yes, the E matters. But not at any cost. So please encourage the LEPs to explore scenarios much more interesting than just the accrual of GDP.

Be more than just mere ‘whipping boys’ for the Treasury, and help us to find a genuine New Deal.

Building a 21st Century Economy

Reasons for Not Doing Micro-Enterprise Support

So just why is it so rare to see decent business support provision developed specifically with the micro-enterprise in mind?  Well I suspect because there is a perception amongst the powers that be that it is hard, expensive and wasteful.

  • There are just too many micro-enterprises to offer more than a generic website.
  • Micro-enterprises are just too heterogeneous – they all have different wants and needs.  There is no one size fits all solution for them.
  • They just don’t have the capacity to absorb and act upon the services and guidance we offer.  There is no HR team to work with our skills offering, no marketeers to get involved with our business development work.
  • Micro-enterprises just aren’t able to engage strategically with support.  Everyone in the micro-enterprise is too busy doing their day job to invest in their development. They have no discretionary time to invest.
  • There is little return on public investment in micro-enterprise. They start small stay small and die small.  They are just lifestyle businesses that have little potential for job creation.
  • We don’t really understand them.  Our boards and committees are overloaded with people from big business.
  • To make a significant economic impact it is much easier to work with the big employers.  One big employer could trigger thousands of apprenticeships across the UK.  We might need to work with 10 000 micro-enterprises to find just 100.
  • Big businesses understand how the game is played.  They come to breakfast meetings, read policy papers and generally know how to work with the system.  Micro-enterprises tend to be much more opinionated, impatient and generally difficult.
Personally I think that each of these are actually reasons why enterprise support should be emphasised.  It is a massive market, driven, focussed and unlikely to indulge in pointless grandstanding and meetings.  The diversity of the sector means that is faces every problem and opportunity imaginable but also that the sector has all of the experience and skills within it that it requires.  The challenge is to get the know-how flowing. HINT when dealing with a large market this is not done by fielding a few experts.  If we can influence just a small part of the micro-enterprise market then we can make a massive difference.
Perhaps it is time we changed the rules of engagement to recognise how micro-enterprises work.  Drop the committees, agendas and the policy reviews and start committing to action and learning instead.

The Alternative LEP and Micro-enterprise

Our alternative LEP will have a board stuffed full of owner managers of micro enterprises.

Don’t get me wrong we will have ‘token’ small and medium sized board members too – but will draw the line at Big Business. They have enough lobbying clout and influence to fight their own battles.

So what type of policies would our board look at developing?

  1. Programmes to promote local supply chains and sourcing from micro-enteprise wherever practical
  2. Conduct a major overhaul of commissioning and procurement processes in the public sector (local authorities and NHS as primary targets) and where possible big businesses to ensure that they are as micro-enterprise friendsly as possible
  3. Divert training and learning budgets away from FE colleges and pay owner managers to take on apprenctices and teach them current, commercial practices.  Move the locus for learning from the class room into the workplace.
  4. Develop ways to enable micro-enterprises to co-operate and collaborate so they they can punch above their weight. Promote collaborative consumption and production.
  5. Promote local economy arguments and the importance of keeping cash in local peoples hands rather than handing it over to multi-nationals

What other policy areas would an alt-LEP that understood micro enterprise seek to develop?

High Growth/High Start Up Rates – and why we must not chase them

Should we throw our limited resources at businesses that we believe have high growth potential or should we just go for lots of start-ups, knowing that a minority of them will experience high growth anyway?  I can imagine LEPS all over the country worrying for seconds over this conundrum.

The plain truth is that both are equally foolish policy goals.

We simply can’t pick winners/high growth businesses. So how do we know which to resource?

And as Drucker said ‘you can’t have the mountain top without the mountain’ . High growth businesses emerge from a strong and vibrant enterprise ecology. An ecology that is diverse, tightly knit and well connected (bridging and bonding, social and cultural capital).

Focus on building the mountain and the top will look after itself.

But please don’t build the mountain by rushing to increase the start up rate.

When we do this we just increase the failure rate too and that undermines aspiration and confidence. So start fewer businesses, but make sure they are good ones, team starts, well thought through and researched. Get survival rates into the 90%s after three years. Not just survival, but successful. Allow these small but significant success show the way to others.

So set up a broad enterprise ecology – lots of people with ideas and the confidence to act on them (this is not just about business but about social impact, culture, festivals, campaigning and so on) and build social networks, communities, that know how to support their members.

Invest your economic development budget in supporting people, who really are committed to making things better, and building communities. Smart, confident people in competent communities will not only give you the economic outputs that you require – but they might just give you something much more interesting as well.

I expect these ideas to be dismissed by those who have High Growth and Mass Start Up Programmes to sell, and by those running economic development teams who have for decades been buying these programmes and commissioning evaluations that say ‘much has been achieved but much remains to be done’.

 

But perhaps some will see that now is as good a time as any to try something new….

 

 

The Alternative LEP Enterprise Zone

Enterprise Zones are places where a different set of rules apply to business.  Inside the Enterprise Zone businesses get:

  • business discount rate worth up to £275,000 over five years for firms that move into the area over the course of this parliament
  • a more relaxed, flexible and ‘radically simplified’ planning regime
  • access to ‘superfast’ broadband.*

Enterprise zones will be pockets of the country where the usual rules that govern the relationships between business and society are bent to the advantage of business.  Business will get enhanced public services in the area, and they will pay less for them. Their operating costs will be reduced.  It will be those of us who neither live nor work in an enterprise zone who will pay.  We will be relying on the ‘trickle down fairy’,  trickle down economics to ensure that we all share the success of those who can afford to invest in an enterprise zone.

Enterprise zones ‘work’ (on their own purely economic terms) when they are able to attract more investment.  They attract more investment by reducing the risks and  increasing the rewards for the investors.  We subsidise those investments.

Interestingly the Government is reported to have said that it does not want Enterprise Zones to be about remedying local dereliction but about economic growth.  This is about making public investment where the return on that investment, measured in economic terms, are likely to be greatest.  This means that it is likely to be an investment in already strong economies, helping them to become stronger.

So how might things be different with some #altlep thinking?

In an alternative LEP I think the logic may run a little differently. I think we may question the wisdom of zoning, and instead prefer to think about how we can improve the preconditions of enterprise for all.

We would also make sure that we did nothing that was going to further benefit big business while doing little to help the small businesses that are increasingly the mainstay of our economy.

I think we would think twice before easing planning requirements in certain zones.  Either we have got the planning process right in holding the balance between environment and business or we haven’t.  Or perhaps we should devolve more powers of planning and taxation to the local level so that those who will really be impacted can have a say?

We would recognise that enterprise is expressed in many different voices, not just the voice of business.  We might be interested in setting up a ‘social enterprise zone’.  An area where enterprise is encouraged because of its positive impact on society, not just on the economy.  The mantra might be, ‘yes please make some money if you wish, but make something much more interesting as well, please….’

I think we might question trickle down theory that says ‘a strong economy produces strong public services which in turn produce a strong society’.  While it is true that ‘a rising tide lifts all ships’, in a ‘rising’ economy some people rise much further and much faster than others.  And when the economy sinks, well not all hands sailors share the same risk.

I suspect we would think much more deeply about the psychology of enterprise, the mental barriers to acting boldly in pursuit of dreams, rather than how we can change fiscal and planning policy to encourage those who are already doing it to do it more profitably.  How do we change the psychological landscape so that many more individuals take responsibility for their own lives?  That they feel that it is possible for them to make progress, without waiting for a benevolent employer to come along and offer them a job.

I suspect we would seriously consider the impact of a traditional enterprise zone on its neighbours.  Displacing jobs is not the same as creating as them after all.