The Case for a New Economic Vision
In the aftermath of the 2008 financial crisis, it became evident that the traditional approach to regulating individual banks and sectors was inadequate. The crisis exposed the systemic vulnerabilities of an interconnected global economy, prompting a shift towards macroprudential regulation. However, this lesson has yet to be fully applied to the British economy, particularly on the supply side.
The current British state operates with a pre-2008 mindset, focusing on individual sectors and firms, while neglecting the systemic issues that lead to instability and excessive costs. This approach has resulted in a state-market hybrid that fails to address the root causes of economic challenges.
A New Paradigm: The Productive State
The solution lies in the concept of the Productive State, a public institutional architecture designed to intervene at the specific sites of instability, extraction, and underinvestment. This approach goes beyond the traditional binary of market coordination and welfare state redistribution, offering a third pillar of political economy.
The Productive State directly owns and operates capital in essential sectors, such as energy, water, housing, and care, ensuring public provision of the essentials required for a dignified life. By investing public money into public assets, it aims to create a three-tier economy: a decommodified foundation of essentials, a stabilized and dynamic market middle, and an innovation frontier enabled by the security of the foundation.
Manchesterism: A Practical Demonstration
The Greater Manchester programme, led by Andy Burnham, provides a compelling example of the Productive State in action. By regaining public control of essentials, the programme has successfully addressed affordability and economic dynamism simultaneously. This approach is not just about tackling the cost of living crisis; it is about building a more inclusive, resilient, and democratic society.
Manchesterism, as a political project, offers a viable path towards national-scale implementation of the Productive State. It demonstrates that public control of essentials can reduce costs, improve services, and create a more equitable distribution of resources.
The Wrong Tools for the Job
The conventional response to economic challenges in Britain has been limited to income redistribution, regulation, and planning reform. While these measures have their merits, they often fail to address the underlying issues of market power and ownership.
Income transfers, for instance, provide temporary relief but do not address the structural problems in essential sectors. Regulation faces a delicate balance between attracting private investment and disciplining private owners. Planning reform, while necessary, does not guarantee that private capital will flow to essential assets.
The Power of Public Corporations
The institution at the heart of the Productive State is the public corporation. These entities, operationally independent and commercially mandated, offer several advantages over private alternatives. They can plan for the long term, access lower-cost capital, and coordinate system-level investments more efficiently.
Public corporations can deliver infrastructure at lower costs, with progressive pricing, while maintaining operational independence. This approach has been successfully implemented in other European countries, resulting in lower bills and better services.
The Criteria for Intervention
The Productive State intervenes based on specific criteria, ensuring that private ownership generates dynamic gains in essential sectors. These criteria include productivity exhaustion, systemically significant prices, investment strike, social need, and public policy goals.
By applying these tests, the Productive State identifies sectors where private ownership fails to meet its own standards, leading to rent extraction, underinvestment, and the systematic transfer of risk to vulnerable populations.
Manchesterism in Action: A Success Story
The success of the Greater Manchester programme is evident in the improved public transport system, particularly the Bee Network. Passenger numbers have increased, routes have expanded into underserved communities, and fares have been capped at affordable levels.
This practical demonstration of Manchesterism showcases the potential for public control of essentials to reduce costs, improve services, and create a more equitable society. It is a powerful argument for the expansion of this approach on a national scale.
Overcoming Objections
There are valid concerns about the fiscal, institutional, and political-economic implications of implementing the Productive State. However, these objections can be addressed through careful planning and sequencing.
The fiscal argument is addressed by the revenue-backed model of public corporations, which has been successfully implemented in countries like the Netherlands. The institutional capacity of the British state can be built through institutional investment and operational experience, as demonstrated by recent initiatives like the AI Safety Institute and the Bee Network.
Building a Political Coalition
The most significant challenge lies in building a political coalition to support the agenda. While the constituency exists in latent form, with workers, communities, and households bearing the privatization premium, the organized political expression of their interest is lacking.
Manchesterism has begun the process of building this coalition through the demonstrated experience of public provision. By creating material stakes and political durability, it lays the foundation for a broader movement towards a more equitable and stable economy.
A Choice Between Paths
Britain stands at a crossroads, facing three potential paths. The first, external expansion, offers a false promise of sovereignty through protectionism and external pressure, leading to geopolitical instability. The second, stagnation, accepts the limitations of private ownership, resulting in low investment, high unemployment, and fiscal constraints.
The third path, as advocated by Keynes, is the 'somewhat comprehensive socialisation of investment,' which the Productive State embodies. This path offers stability, abundance, and security by building productive capacity, controlling upstream variables, and expanding the conditions for genuine enterprise.
A Political Community Based on Dignity and Equality
The case for Manchesterism and the Productive State goes beyond economic efficiency. It envisions a political community founded on dignity and equality, where universal public provision creates a shared institutional basis for a politics that transcends identity and interest fragmentation.
By delivering macroeconomic stabilization, abundance through coordination, and security through decommodification, the Productive State offers a compelling alternative to the existing settlement. It provides a framework for a more equitable, dynamic, and democratic economy, where shared abundance weakens the empire of necessity and expands the realm of freedom.
