This second guest post by Professor Calvin Jones about Wales’ economy is part of Afallen’s objective of elevating the terms of the debate in Wales about how our economy operates – and what can be done to improve it. You can read Calvin’s first blog post here.
Header photo: courtesy of Jim Nix.
London never sleeps it just sucks,
‘Londinium’
The life out of me,
And the money from my pocket.
Mark Roberts / Catatonia
© Brodyr Warner 1998
Ah, what a song. But is it a metaphor or… just a song?
The problem (as defined by me)
So. We all know Wales has some longstanding economic… issues. There has been a tendency by some – perhaps increasing – to blame our economic woes on the ‘noisy neighbours’, handily dovetailing with concerns about cultural and linguistic marginalisation over the centuries. It was the English what did it!
So far so defensible. Maybe? But this notion ignores the (resolutely English) single mother scraping by on Universal Credit in Newcastle. Welsh ‘economic exceptionalism’ wilts a little when you realise the UK is probably the most regionally unbalanced country in Europe. As I have previously argued there is something different about peripheral economies and Wales does seem to suffer from peripherality more than most, but the specific ‘Welshness’ of this needs unpacking. We might start with the more widely applicable notion that ‘development develops inequality’ through a process of unequal exchange. Markets are organised, and this is done by powerful firms, institutions and countries that are resolutely core – right in the middle of the nexus of relationships, geography, intellectual property and ownership that constitute political-economic power. Then, if the system allows such actors to exploit and extract critical natural and human resources that might emerge in the periphery, well… them’s the rules.
It is one thing to recognise and (as I do) accept this characterisation of the global economic system. Quite another to know what to do about it. As Joshua discovered in Wargames, sometimes the only winning move is not to play.
But that seems… impossible. So how do we play to win? Or at least lose less badly? How do we halt or at least reduce the flow of value out of our little part of the periphery, and capture more of it here?
Solution the First: Play their game better
Imagine Wales is a rusty old bucket. With a dragon on you say? OK, fill your boots. But try to fill the bucket with money – from the Westminster block grant to the Welsh Government, and out via procurement; or from Welsh residents’ wages or welfare payments; or from Wales-based company exports; and it all drains away through the holes in the bottom. Fill those holes and the money stays longer, adding more wages, profits, and wellbeing.
Plugging the holes – stopping the leaks can take many forms. And it is potentially powerful, because we start from a low base – this is, for example, an overwhelmingly farmed country that imports almost all its food. Nuts! My economic model suggests if we could shift these purchases so that just, say, 10% more of consumer spend was on Welsh food – so about 85% imported instead of 95% – we could add over £1 billion to Welsh output, £500m to value added, and create around 9,000 jobs. If, of course, we could find the land to grow the food people want, and at the price they could afford. More on which… later. Or perhaps in a future blog if my head starts hurting.
This form of localisation has of course more than purely economic benefits. The pandemic and subsequent supply shocks (Ukraine, that bloody boat) made it crystal clear that long supply chains are often vulnerable supply chains – the last thing you want for critical products (like, I dunno, medicine). Meanwhile, exchanging functionally identical products between countries may make economic sense (somehow) but is energy-and-climate bonkers.
It’s not just ‘stuff’ of course. The 16th Century Acts of Union welcomed Wales into England’s warm legal embrace, and the consequence, half a millennium later, is a suite of common EnglandandWales legal and professional structures. Not only judges, but planners, architects, and lawyers of all kinds can work (pretty much) seamlessly across the porous border. The result has definitively not been the hollowing out of the English professional class by expansionary Welsh firms ?.
This financial, professional, competence, and I would argue, ‘civic’ leakage has left us with an economy that is narrow and weak, and a cultural life lacking depth and reach. Is it any wonder that graduates from Welsh universities (along with those from the North) flock to the South East of the UK to work? Or that the UK Government, along with private companies simply can’t find an excuse to undertake R&D in Wales – in fact, anywhere outside the ‘Golden Triangle’? Or that Welsh companies are always the acquired, never the acquirer?
Plugging the leaks – playing this game better – means concentrated, nuanced engagement with a system that is stacked against the peripheral. It means, for example, going far beyond what Karel Williams characterises as the ‘postcode stock-take’ of current public procurement tracking, welcome though that is. On this side, things are now harder with the new(ish) UK Internal Market Act which ensures no regulation will “directly or indirectly discriminate against a service provider from another part of the UK”. So – no local sourcing for its own sake, any more than when Brussels was looking over our shoulder. This is the sort of ‘level playing field’ that ignores structural power and pre-existing financial ‘clout’. And works so well in sport of course.
For the public sector then, deep thought is needed to reshape procurement to genuinely demand ‘foundational economy’ and social (and perhaps cultural/linguistic) benefits in ways that will be naturally more deliverable by – and this is important – responsible, sustainable and embedded Welsh businesses. To ensure that the new Social Partnership Act comes to life in a way that, perhaps, the Future Generations Act initially struggled to. And critically, to be prepared to pay more for contracts that deliver a wider range of benefits, and which at least begin to change the structure of the Welsh economy. To (as Karel Williams and Kevin Morgan suggest) actually resource, develop and reward strategic procurement as a profession in Wales. To work to a situation where we procure locally, not out of the goodness of our public sector hearts, but because it delivers. Easy then.
Of course, localisation is not only about public procurement. The largest UK experiment in re-localisation so far was of a completely different sort. To illustrate, in England the ‘Preston’ model’ focused on the localisation of public procurement to deliver a claimed £40m improvement in the town and perhaps £200m across Lancashire as a whole. Excellent stuff. But Scotland meanwhile has undertaken the localisation – indeed, effective autarkisation – of its £10bn higher education system. Students don’t go in, students don’t come out! Around 85% of Scotland’s UK-resident students are Scottish, and the great majority stay there after graduation – with of course huge impacts on the economy. It’s like North Korea, but with worse weather and an unstable political system.
And this is the result of a deliberate and calculated decision by their regional government – right at the start of devolution – to treat Scots differently but only if they made an education decision seen as more widely beneficial. Could we do this in Wales? Well, there was clearly no appetite when tuition fees were last examined by Kirsty Williams in 2017, and perhaps our smaller sector makes it a bit more difficult to sell: eight universities compared to fifteen (as of today, Tuesday, but don’t hold me to that). But this is a sector that is about to undergo a significant cross-UK shake-out in any case, as international student numbers collapse and the business model goes with them. Here we have a real and urgent opportunity to re-localise. At the moment, there is little ‘extrinsic’ incentive for academics to set themselves the task of helping solve Wales’ problems over a sustained period; no large ongoing research pots, or ‘local impact weightings’ in career progression or hiring for example. Given the difficulties inherent in squeezing globally-recognised papers from studies of a small, data-poor regions, it is left to individual academics to undertake (often excellent) work through the hard yards of developing external stakeholder relationships, and bending large UK-level grants to Wales-appropriate ends.
Given the almost laughably low level of business and government R&D undertaken in Wales, can we really afford the vast majority of academic research in Wales not to be for Wales? If Universities are looking down the barrel of big reductions in the international student fees that currently subsidise research, a new funding model will be needed. And maybe, at the same time, some new objectives found.
What was that thing about never wasting a good crisis?
There are potentially other big localisations we can consider. For example, whilst the £10bn of local government pension funds under management by Hymans (checks the internet: no office in Wales) are doing well in terms of fossil disinvestment and climate risk, the proportion invested in Wales seems to be, as far as I can judge, £68m… Nought point seven percent. And look, I know this is complicated, I know there’s a primary fiduciary duty on trust managers, and perhaps Welsh investments are more risky but…. 0.7%? Really? And we’ve been talking about this for years, and getting nowhere. In 2018 the Institute for Welsh Affairs suggested that Welsh pensions weren’t invested in Wales due to the “cultural and behavioural decisions of pension fund trustees, boards and consultants/ investment managers”. Basically, London folks can’t be bothered with understanding, and carrying out due diligence, on such trivially small investments in this wonky little peninsular. And nobody makes them. Even though it’s our money.
This stuff, this £10bn, matters (especially in a context where our public sector can’t easily borrow against the future). If we don’t even invest our own money here… why would anyone else? This is not all down to the pension fund supply side however: If all that is on offer in Wales small yet politically toxic renewables, we will get nowhere in developing a more locally oriented investment model – in pensions or elsewhere. Joining up floating, responsible and patient funds with at-scale, commercially attractive investment opportunities in socially, climate and ecologically useful stuff is a priority. But I’m not sure we even really understand the key barriers, let alone have the will to address them. A similar argument might be made at the other end – for a more bespoke Welsh finance system better suited to the needs of our micro organisations. But the Interwebz reveal I first argued for a Cardiff stockmarket over a decade ago, and I do hate repeating myself ?.
Solution the second: Invent another game
So… it is perhaps possible to play this game better, by identifying where Wales is especially weak, where opportunities exist to lever greater local value, and then to focus on both big-ticket and long-grind interventions that might make a difference. But… we live in a world where the material prosperity we chase is fundamentally enabled by ecological destruction, climate chaos, huge flows of materiel and economic value, from the global south, and deeply unpleasant impacts on the poorest. Striving to be a slightly bigger dog in a dog-eat-dog world is in my view (and that of the Future Generations Act) a non-starter. The re-localisation of production – and even adding circularity – does nothing unless we also deal with the other half of the equation: our hyper-global, and hyper-problematic consumption.
Despite some measurement, governments talk much less about the radical changes to our consumption habits needed to secure a liveable future. The unsustainability of consumption is not unrelated to the remoteness of the consumer from where the goods are produced. We never see the emissions created as flowers are flown from Kenya to our local petrol station, just-in-time for 8pm on your anniversary. I have literally no idea which server is streaming my Netflix-Disney+-AppleTV-Paramount film at any given time, let alone how its powered, or whether any children were harmed in the production of the phone I’m watching on). And we pay almost none of the (horrific) environmental costs of all the food we eat. All a bit depressing I know. Think I need a few days in Ibiza to recover.
This, then is perhaps another emergency we can’t afford to waste? Wales has done really quite badly from the existing system of global capitalism. Surely a new, more sustainable system would be naturally (sic) more local, helping keep prosperity in Wales and wellbeing high?
Well, maybe. And maybe not.
The first point to make is that Wales is, really, a very unlocalised economy right now, for almost all our big purchases: Food, financial services, energy are just some of the biggest, most leaky examples. To switch these to regional supply to any meaningful extent not only requires a geographical transition but also a product transition, on both sides: for example, in both what we eat and what we grow. And the elephant in the room is that once we bring this stuff closer to home, it’s more costly – firstly because we lose out on all the cheap land and cheap labour and cheap energy that currently underpins our imports, and secondly because there’s only any point in doing this if we incorporate the costs of ‘externalities’ in production.
Escaping our history
I look to the future, it makes me cry (well not really, I couldn’t resist it). More seriously, this is… quite a difficult ask in a country where a fifth of children are already living in absolute poverty and where the public sector is currently undergoing decimation-by-Barnett. It is hard therefore to see how any substantive transformation towards locality could happen without significant income redistribution, a completely different regulatory and tax approach, and deep behaviour change on the part of consumers. That’s going to look great on the side of a 2026 election campaign bus.
In the absence of these frankly unlikely things, maybe we are left with just playing the existing game a bit better, taking small wins where we can, and hoping that this translates to a slightly less crap outcome. But remember, crises aren’t often obvious until they arrive. A decade ago, when I was writing about peak oil and feeling especially hopeless (but had more hair), I would be asked what would get the fossil-fuel addicted Welsh economy ‘off oil’ – given the same social and political constraints we face now…
My answer back then would be ‘the fall of the Saudi government and its replacement by an Al-Qaeda junta that turned off the taps’. That never happened, and Wales remains resolutely carbonised. But the point is not lost. Any one of a number of tipping points – ecological, climate, geopolitical or financial – could significantly reduce our ability to draw resources from across the globe. The signs are already there. Bankruptcy happens gradually, and then suddenly. Economic transformation and a higher reliance on our own resources is, I believe not a choice. Our choice is whether it is careful or chaotic. Just, or just exploitative. A more local, self-sufficient, resilient and fair Wales can and should be imagined – indeed, our Future Generations Act demands it. The good thing is that imagination costs nothing.
4 responses to “Must Everything Go? The Prospects for economic (re-)localisation in Wales”
@admin @calvjones
@davidoclubb @admin @calvjones you can more readily affect what’s close, especially if primed.
Part of the growth, of ‘post growth’ economics has been the #WFGAct – but now it needs a reservoir of watering.
A way to do that, get the Welsh public bought in to it.
Wellbeing economics can readily appeal to our intrinsic higher values, especially now, when it’s got real hard to ignore the world’s abused by billionaires hands, & how their money has corrupted power structures, our communities.
@nspugh @davidoclubb @admin @calvjones it may sound peripheral, but self-esteem can be rocket fuel in economic development. It is beyond time for both of the Welsh and English to realise that the basis of English grammar is essentially Welsh, not Anglo-Saxon.
I cannot help but think that once there is a general realisation that English is essentially bastardised Welsh the attitudes of each country toward each other will undergo a sea change.
@admin
https://youtu.be/y4CA8p3OLvc?feature=shared