The New Economics: outlining systemic and synergistic public policies

The new economics that is struggling to grow today is something very different than the previous century. It constitutes our response to a new set of problems which was only dimly perceived earlier, but has steadily grown in urgency over the last quarter of 20 century. It attempts to put forward new ideas about how to organise the foundations of a sustainable economy at this juncture in history when there are clear signs that the global economy cannot move much further along the accustomed paths of industrial growth without ending up in total disaster. The new economics reflects the growing worldwide demand for new ways of economic life and thought that will conserve the Earth and its resources, and empower people to meet their own needs and the needs of others.

In general it brings a more radical perspective to sustainable development and implies more far reaching changes than the mainstream perspective; emphasising the need to move away from a state centred or business centred economic system, towards a more people centred system, and away from money measured growth as the principal economic target and measure of success, towards sustainability in terms of real life social and environmental and economic variables. Governments and government agencies including the Eu Commission are themselves an important part of the problem. Existing public policies - e.g. for agriculture and transport, but in most other fields also give powerful encouragement to unsustainable development. Governments and government agencies will come under steadily increasing pressure to rectify that. Being advised to put one’s own house in order may not be the advice one most wants to receive. But policy makers need not see it as negative and unexciting. The proposed changes in existing structures of taxation and public expenditure aim not merely to remove incentives to unsustainable development, but to replace them with powerful positive incentives in favour of sustainable development. This will bring about more systemic and synergistic possibilities where a shift towards sustainability in each field will encourage a comparable shift in the others. As it takes time for mainstream opinion to adjust to the new economics, some of its more important policy implications will not yet be acceptable to many of the people who need to consider them, until compelled to take them seriously. Pressure will continue to grow for changes in economic life that will give primacy to the needs of people and Earth, and for changes in economic thought that will provide new concepts of economic efficiency and progress.


Principles of the New Economics

- Systematic empowerment of people as opposed to making and keeping them dependent, as the basis for people centred development
- Systematic conservation of resources and environment, as the basis for environmentally sustainable development
- Evolution from a wealth of nations model of economic life to a one world model and from toady’s international economy to an ecologically sustainable, decentralizing, multi level one world economic system
- Restoration of political and ethical factors to a central place in economic life and thought
- Respect for qualitative values, not just quantitative values
- Respect for feminine values, not just masculine ones

Hence policy making will be based on realistic view of human nature, recognizing that people are both altruistic and selfish, cooperative and competitive. Thus it recognizes that evolving the economic system to reward activities that are socially and environmentally benign and not the reverse, as at present, will make socially and environmentally responsible choices the easier choices for people and organisations. Policies ought to be dynamic and developmental, working for changes in the direction of progress, not to a blue print for a final destination. New economics policies are critical and constructive, based on recognition that effective opposition to conventional economic development and thought is a necessary part of the transformation. They will focus more directly on people as active citizens. Recycling a significant proportion of public revenue directly to citizens as a citizen’s income will be an example.

The implications of sustainable development across a range of policy areas include farming and food, travel and transport, energy; work, livelihoods and social cohesion; local development; technology; business; health, and law and order. A number of framework policies are noted that apply to all these policy areas, such as:
- Restructuring the tax system in favour of environmentally benign development and higher levels of employment and useful work
- introduction of a citizen’s income paid unconditionally to all citizens in place of many existing social welfare benefits
- termination of subsidies and other public expenditure programmes which encourage unsustainable development
Introduction of public purchasing policies which encourage contractors to adopt sustainable practices
- development of more self reliant local economies, involving support for local banking and financial institutions, local means of exchange, local shops, and easier access for local people to local means of production
- Development of indicators to measure economic, social and environmental performance and progress
- Development of accounting, auditing and reporting procedures to establish the sustainability performance of businesses and other organisations
- Demand reduction policies (e.g. for transport and energy), and the need to consider their implications
- Changes in the existing international trading regime, to encourage sustainable forms of trade

Public Spending

It needs to be understood that the whole array of public expenditure programmes and taxes existing at any one time together with the non existence of public expenditure and taxation on other things, constitutes a framework which helps to shape market prices and thereby rewards certain kinds of activities and penalizes others. This framework should be designed to encourage economic efficiency and enterprise, social equity, and environmental sustainability. It should be designed to minimize uncertainty and disruption caused by need for ad hoc interventions in the workings of the market.

The following specific conclusions are noted:
Public purchasing policies should encourage sustainable and equitable practices on the part of contractors, thus contributing to sustainable and equitable practices throughout the economy
Systematic reviews should be carried out and published on the sustainability effects of all public subsidies and other relevant public expenditure and tax differentials, with the aim of eliminating subsidies that favour unsustainable development (one estimate has put the total value of environmentally damaging subsidies in Britain alone at £20 bn a year)
Temporary subsidies for sustainable development initiatives such as green investment funds should be considered. But reducing the existing bias of taxation and public expenditure in favour of unsustainability is more important
Systematic reviews should be carried out a nd published on the possibilities for re-orientating public spending programmes, with the aim of preventing and reducing environmental and social problems before the event, rather than concentrating on trying to clean up and remedy their effects afterwards.

The Global Economy

We can help to shape global economic policies and institutions in support of people centred, environmentally sustainable development all over the world.
We can:
- Show that we are committed to reorienting our own way of life towards sustainable development
- Ensure that our own national activities in the spheres of international trade, investment and aid contribute to sustainable, not unsustainable, development in other parts of the world
- Participate effectively with the rest of the international community in the building of new global institutions, and the restructuring of existing ones, in support of sustainable and equitable development

The new economics points to the only effective way to deal with our problems of environmental damage, unemployment, rising poverty, growing underclass, and declining social cohesion. Its policy implications demand attention.

Robertson, J., The new economics of sustainable development, European Commission, Forward Studies Series, 1999


The UK Economy

The UK economy is the world's fourth largest. Gross Domestic Product (GDP) was almost US$1.8 trillion in 2003 (equivalent to around £1.044 trillion sterling at December 2003 prices). The UK's people are the world's twelfth richest. The strongest performing sector in the UK economy is business and financial services. Measured by 'Gross Value Added' (GVA), this sector represented over 30 per cent of economic output in 2002. In contrast, agriculture's contribution dropped below one per cent whereas manufacturing comprised only about 16 per cent of GVA. Information and Communication Technologies and the creative sector both showed growth over the period 1992 - 2002. There are over 1.6 million VAT registered enterprises in the UK. Over 94 per cent of these enterprises have less than 20 employees. Around 75 per cent of people of working age are in employment. The number of people claiming Jobseeker's Allowance stood at 833,200 in November 2004, the lowest since July 1975.

A study by the Employment Policy Institute for the Joseph Rowntree Foundation found that there was a marked increase in non-activity among men aged 50 and over during the last 20 years. Personal debt in the UK stands at more than £1 trillion. This has partly been attributed to sustained low interest rates for borrowing. A survey for the Bank of England concluded that the proportion of the total debt owed by those with debt problems has actually decreased. The black economy (i.e. economic activity not declared in order to avoid tax and other obligations) has been estimated at 10.6 per cent of GDP. Based on analysis of household expenditure and income data, researchers at the University of Cyprus estimated that patterns of expenditure for households where there were self-employed individuals matched those of employees on much higher reported incomes. During the tax year 2002-2003 average gross annual pay for full time employees in the UK was £25,170, or £476 per week. This represents a growth of 2.6 per cent on the previous year.
The average UK household spent £406 per week in 2002-03. Transport was the highest category of spending, at £59 a week. On average households spent £56 a week on recreation and culture and £40 a week on food.

Between 1990 and 2002, total UK greenhouse gas emissions declined 10 per cent. However, the transport industries were one of the few exceptions to this downward trend. Greenhouse gas emissions from the transport industries were 47 per cent higher in 2002 than in 1990.The UK transport industries (mostly aviation and maritime industries) were responsible for emitting the equivalent of 86.0 million tonnes of carbon dioxide in 2002 compared with 58.5 million tonnes in 1990. Greenhouse gas emissions from road transport now constitute 18 per cent of all UK emissions. In spite of downsizing and restructuring of modern organisations to "flatten" management hierarchies, the ranks of managers in the UK are actually reported to be growing. Global competition has highlighted the need for adoption of modern management initiatives to deliver enhanced quality and cost-effectiveness in UK business operations. With the emphasis placed upon empowerment of employees to achieve these operational aims, the issue of development of managerial competencies within the workforce becomes paramount.
According to the Labour Force Survey, in Autumn 2004 the highest proportion of employees in the UK (14.9 per cent) worked in the "managers and senior officials" occupational group. This group, as defined by the Standard Occupational Classification (SOC), includes corporate managers and managers in agriculture and services. Based upon average hourly wage, the "managers and senior officials" occupational group is one of the highest paid across all occupational sectors in the UK, according to the autumn 2004 Labour Force Survey. The UK relies less upon family members of company owners to manage corporations and more on professional managers. The UK also has a lower proportion of managers with advanced formal educations compared with other countries, but this may be due to the higher proportion of UK employees that are classed as managers. The Changes in Employer Practices survey reports a net recorded growth in the number of managers being recruited since 1999 in all sectors. This trend was especially prominent in financial and business services, public administration, health, education, manufacturing and construction.

The smallest increase in management recruitment was expressed in the transport, storage and communications sectors yet still more respondents reported increases in management recruitment than decreases. A survey study of large service organisations showed that half the organisations studied used Competency Based Management Training (CBMT) programmes to train their managers, with the aim of increasing the availability of skills that were of direct business value. CBMT represents a significant investment for organisations in managerial competencies, with 2/3 of the organisations studied spending over £1,000 per manager and 1/3 investing over £2,000 in the training of each manager. The Management Standards Centre (MSC) defines managerial competencies based upon definition of criteria associated with effective management of people, finances, operations and information. The table below outlines six key functions associated with effective management and leadership, according to the MSC, which may be used to structure management training and competency development programs. According to a review of UK competitiveness by the Department of Trade and Industry in 2003. There is some evidence to suggest that UK companies are slower and less likely to adopt contemporary management programmes such as Total Quality Management, then their foreign counterparts, especially in the manufacturing industry. A number of explanations for this trend have been proposed, including: resistance to change, inadequate training, low private and public investment in R&D, and lack of collaborative institutions for the dissemination of management best practices.

Small and medium-sized enterprises provide more employment and business turnover in the UK than large firms and public organisations together. In 1998, firms with fewer than 250 employees employed 57 per cent of the workforce and accounted for 54 per cent of turnover. Effective management of SMEs provides certain challenges, including the control of innovation, marketing and training needs, compared with larger enterprises that possess specific departments to deal with these functions. Effective management is essential to secure competitive viability in globalised markets and the emerging knowledge-based economy. Increasing availability of information technology and Internet business means increases in the levels and strength of competition. The challenge for modern managers lies in effective "knowledge management" and the creation of perpetually "learning organisations" to achieve valued innovation in both products and business processes.

The UK population is projected to continue to grow, increasing gradually to 64.8 million by 2031. Longer-term projections suggest the population will peak around 2050 at over 65 million and then gradually start to fall. Over 90 per cent of the British population live in cities. The majority of people in the United Kingdom use their right to vote at general elections. However, the turnout in the June 2001 election was the lowest since the election in 1918. Only 59 per cent of those registered turned out to vote in 2001 compared to 76 per cent in 1979. In the last election, 41 per cent of all votes went to the Labour Party.

The UK has 78 seats in the European Parliament, which are distributed between 12 electoral regions. Elections were held for the European Parliament across Europe between 10-13 June 2004 using a system of proportional representation. Age differences in turnout were evident in the last election. In general people who were under 34 were less likely to vote than those in older age groups. Immigration levels in the UK are rising, according to Home Office control of immigration statistics. UK immigration levels have undergone a sharp increase in the years since 1998, prior to which they remained relatively stable for 10 years, at 60,000 immigrants per year. By 2003 the annual number of people granted settlement in the UK rose to just less than 140,000, an increase of 20 per cent from the previous year and approximately double the level reported in 1998. Concern over the adequacy of UK immigration and asylum systems has led to recent developments in policy in 2003 and 2004. These changes include a new asylum and immigration bill, processes for managed migration, establishment of a National Asylum Support Service (NASS) and developments in existing policies, such as those concerning migrant workers schemes. In 2002, the majority of asylum seekers were male (75 per cent), under 30 (67 per cent) and from Asia, Africa or the Middle East, with countries such as Iraq, Zimbabwe and Afghanistan at the top of the list. In terms of the number of people granted asylum annually, Home Office figures report that both applications for asylum and the number of applicants actually granted asylum in the UK in 2003 fell to 60,000, a comparable level with 1998. Slightly more than 13,000 people were granted asylum in the UK in 2003. With similar pace, application levels dropped by 42 per cent between 2002 and 2003. The International Passenger Survey IPS, is a voluntary sample survey that monitors inflow and outflow through all major points of departure between the UK and the rest of the world. It records data associated with country of visit/origin, purpose of visit, length of stay, age and gender, amongst other factors. The sample taken involves 250,000 interviews per year, representing 0.2 per cent of all travellers as they enter or leave the UK.

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