The Hidden Wealth of Nations E-Book

David Halpern

• Herausgeber: John Wiley & Sons
• Kategorie: Geisteswissenschaft
• Sprache: Englisch

Seitenzahl: 604

Veröffentlichungsjahr: 2013

Beschreibung

Richer nations are happier, yet economic growth doesn't increase happiness. This paradox is explained by the Hidden Wealth of Nations - the extent to which citizens get along with other independently drives both economic growth and well-being.

Much of this hidden wealth is expressed in everyday ways, such as our common values, the way we look after our children and elderly, or whether we trust and help strangers. It is a hidden dimension of inequality, and helps to explain why governments have found it so hard to reduce gaps in society. There are also deep cracks in this hidden wealth, in the form of our rising fears of crime, immigration and terror.

Using a rich variety of international comparisons and new analysis, the book explores what is happening in contemporary societies from value change to the changing role of governments, and offers suggestions about what policymakers and citizens can do about it.

Leseprobe

Table of Contents

Cover

Title page

Copyright page

Preface

Acknowledgements

Introduction

1 Prosperity and Well-being

Markets and Well-being

Can Well-being be Measured?

Is Well-being Important?

The Drivers of Well-being

Is Subjective Well-being the Business of Government?

What are the Implications for Policy?

Well-being Doesn’t Mean Abandoning the Economy

Conclusion

2 Not Getting Along

Crime – High and Rising?

Why are Some Countries More Afraid than Others?

Reducing Actual Crime

Immigration

Terror

Conclusion

Appendix

3 The Politics of Virtue

Beyond ‘Respect’

Religion, Ethics and Secular Society

The Economy of Regard

Good Fences Make Good Neighbours

Crowding Out Regard

Oiling the Economy of Regard: The Case for a Complementary Currency

Implications: The Space between Formal Welfare and Family

National Identity

Soft National Identity: Within Nation Convergence of Norms

War

Conclusion

4 Fairness and Inclusion

Income Inequality

So What? The Impact of Poverty and Inequality

Meritocracy

Social Mobility

Inequality – One or Many?

Values and Sympathies

Attitudes to Inequality in the UK

What Do we Do? Between Weber and Laissez-faire

National Differences

Policy Ideas for the Next Decade

Conclusion

5 Power and Governance

What is Government For?

The Classic State

The Practical State

The Paternalistic State

Conclusion: The Partner State?

6 Conclusion

10 Things to Do If You’re Prime Minister

Appendix: The PMSU

Building the Strategic Capacity of Government

The Future

Index

Copyright © David Halpern, 2010

The right of David Halpern to be identified as Author of this Work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988.

First published in 2010 by Polity Press

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Preface

I started writing this book in the Spring of 2007. The original intent was to write a series of short articles to update and pull together conclusions from papers I had worked on while at the UK’s Prime Minister’s Strategy Unit (PMSU), including those on life satisfaction, social capital, public service improvement, personal responsibility and behaviour change. I had spent from 2001 until Spring 2007 in the PMSU, mainly as the Chief Analyst, working on almost every area of domestic policy including leading our ‘Strategic Audits’; the Respect campaign of 2005; setting up the Social Exclusion Task Force in 2006; and Policy Review before Blair handed over to Brown in 2007.

It has been a difficult but interesting period to write a book. This isn’t a ‘kiss and tell’ history of my time in Government – that would have been much easier. Rather it is a book that draws heavily on empirical, cross-national material about how societies work and are changing, and the implications for policy. But the world doesn’t stay still, and particularly over this last two years. The credit crunch and subsequent recession have wiped trillions of dollars off the world economy, leading to rapidly rising unemployment and changing public concerns, and have challenged and humbled the assumptions of many of my economist colleagues.

Many now see this as an important pivot point in global history. This is certainly the view of the current British Prime Minister, whose relatively optimistic take is that this is the moment at which the world has finally come to terms with the reality of the profound interconnection of the modern economy and the necessity for nations to work together to solve our common challenges. These challenges are not only about the operation of a global finance system, but also the protection of the environment; global health; and global poverty.

At the very least, the current situation has led economists to dust off their models of long economic cycles and ask whether the world is now entering a 15 to 20-year economic winter of a Kondratiev cycle.1 I am not really an economist myself, though I did spend three years at Nuffield College, Oxford – the self-styled bastion of hard-nosed empirical economics and sociology in the UK – as a young Research Fellow. My own disciplinary roots lie more in social psychology, which is what I lectured on at Cambridge for seven years. In this sense, I suppose I am apt to look through the ups and downs of particular economic cycles and events to the continuities of human striving that run through them. The recession will come and go, and through it all we will argue and make up; laugh and cry; endure our private tragedies and successes – the flow of life will carry on.

I hope that this book taps into some of these deeper issues, relevant both in times of recession and beyond. Many countries now face a difficult fiscal environment for the next five years or more, with big rises in national debt that will seem to greatly limit the scope of policymakers and societies. But societies have far more assets than are captured by the tally of national debt and expenditure. For imaginative communities and policymakers, especially for those with the insight and daring to tap into societies’ hidden wealth, the coming decades can be golden ones.

This book is about some of the big challenges that face advanced industrialized nations at the start of the twenty-first century, and how policymakers and citizens could respond to them. History tells us that many seemingly intractable problems of the day go on to be addressed, though often taking a generation to do so. From the ‘great stink’ of London’s sewage in the nineteenth century, to the inflation and labour unrest of the 1970s, many seemingly intractable problems have gone on to be solved. Similarly, unrelenting negative trends, from rising crime to rising smoking, have been replaced with equally dramatic declines through a mutually reinforcing combination of changing public mood and government action. There is no reason why the challenges of today cannot be overcome, especially if citizens and governments work together.

Note

1 Nikolai Kondratiev was a Russian economist who identified long wave movements in prices, wages and interest rates. New innovations – such as the steam engine and mass production of textiles, railways and steel, and the development of electrical devices – drive an economic ‘spring’ of about 25 years. This is then followed by a brief ‘summer’ of about 5 years where excess production leads to falling profits and growth. An ‘autumn’ of mild recession, flat growth and rising debt follows. Finally, a protracted recession triggered by the need to repay debt triggers the ‘winter’, with a period of a further 15 years of sluggish growth until the next innovation kicks in.

Acknowledgements

I need to say thank you to a number of people. This book was written in fragments of time between my main activities of the last two years, and I thank those involved for enduring my periodic absences to work on the book or some obscure analysis connected with it. In this respect, particular thanks go to Lord Sainsbury with whom it has been the utmost pleasure to work with so closely in the creation of the Institute for Government. Anyone who spends a long time working in government – or perhaps in any institution – ends up sure that it could work better. The Institute, through a combination of research and development for top policymakers, should help make this a reality. It has already helped shape my own thinking about how governments and societies can improve their own working. A very special thanks is also due to my fine young research team at the Institute who came up with the title for this book, in particular Simon Parker and Tom Gash. Well done guys!

Other thanks are due to the large numbers of people involved in the Options for a New Britain project, which I edited over the same period. Though much more focused on the nuts and bolts of UK policy, I’m sure that some of my conclusions in this book have borrowed from ideas or analysis that was generated within Options. At the very least, the clear thinking of people like Steve Nickell and Tim Leunig on policy options around the planning system, or Peter Kenway’s sober assessment of the Labour Government’s attempts to reduce poverty over the last decade, provided a powerful sounding board for many of my own thoughts.

I am grateful to many conversations and reflections that I have had over the content and drafts of this book. These include with Lord Richard Wilson, Dan Corry, Michael Bichard, Bob Putnam, Simon Szreter, Mike Woolcock, Peter Gooby-Taylor, Geoff Mulgan, Matthew Taylor, Lord Richard Lugard, Avner Offer, Richard Reeves, Edgar Cahn, Susan Hitch, two anonymous reviewers and various past and present members of the PMSU, including Stephen Aldridge, Gareth Davies, Julian McCrae, Nick Canning, Jonathan Brearley, Harvey Redgrave and Jacob West. I am also grateful to those at Polity who have helped navigate this book through to completion, and particularly John Thompson, Sarah Lambert, and Susan Beer.

Most of all, of course, go thanks to my family – my partner Jen and our two wonderful boys, Aaron and Isaac – and to Michael and Amy and my American relatives who forgave me the antisocial few days. I needed to work through the proofs, including to Eleanor for her sharp-eyed corrections. I know it’s not quite the same, but books do seem a bit like pregnancy – very painful and you’ll swear you’ll never do it again, until the next time.

The publishers are grateful to the following for permission to reproduce copyright material:

Figure 1.2 ‘The relationship between life satisfaction and commuting time’ from the work of Bruno Frey, source SOEP, copyright © Deutsches Institut für Wirtschaftsforschung; Figure 1.4 ‘Changing satisfactions with age’ (UK data, 2007); Figure 4.3 ‘Satisfaction with different domains of life by social class’ (UK data, 2007), source: Defra. Figure 5.6 ‘The characteristics of world class public service’, source: Cabinet Office, 2008. Crown © copyright © 2009. Crown Copyright material is reproduced with permission under the terms of the Click-Use License; Figure 4.7 ‘Educational Inequality and Intergenerational Mobility’ from What’s the Good of Education? By Stephen Machin, Princeton University Press. Reprinted by permission of Princeton University Press; Figure 4.9 from ‘Poverty and Inequality in the UK: 2008’ (IFS Commentary 105), by Mike Brewer, Alastair Muriel, David Phillips and Luke Sibieta copyright © The Institute for Fiscal Studies; Figure 5.4 ‘The UK government’s model of ‘self-improving’ public sector reform’, Prime Minister’s Strategy Unit (PMSU) copyright © 2006; Figure 5.5 ‘Key drivers of satisfaction with public services’ from Citizens First Survey by George Spears and Kasia Seydegart, Erin Research Inc, for the Public Sector Service Delivery Council and The Institute of Public Administration of Canada copyright © The Institute of Public Administration of Canada; and Figure 5.7 ‘Rates of obesity across the world: Prevalence of obesity, males, aged 30+, 2005’ World Health Organisation, http://apps.who.int/infobase/publicfiles/Obesity_Male_2005.png, copyright © World Health Organisation, 2005.

Introduction

You can’t see the wood for the trees

Common expression

Humans notice change. When someone comes in the office with a new hair cut, everyone comments. If there’s a movement in the corner of the room while you’re watching TV, it will catch your eye. If the extractor fan in your bathroom that you’d forgotten was even there changes its tone, it will suddenly seem very loud.

On the other hand, things that don’t change, or change very slowly, almost disappear from our consciousness. We don’t notice the feeling of our toes in our shoes, unless we focus on them. The blind spot in our eyes (where our optic nerve leaves a hole in our retina) is undetectable to us unless we shut one eye and look in just the right place. And for most of us, even if we try our hardest, we can’t hear the pounding of our hearts in our ears.

We see changes, contrasts, the edges of things. Fashioned by the hand of evolution, this overwhelming bias in our perception works well in most of life. But it gives us a rather odd viewpoint on the society and economy around us. It’s not just citizens: even the sharpest of analysts and policymakers see the world this way too. Our attention is drawn to the latest crisis, the latest technological development, or the latest change in our output, tax take or poll. At the same time we are prone to under-attend to the great mass of things that don’t change much. We see only the ‘tip of the iceberg’, and are shocked by the result when we hit it. Governments find that their policies often don’t have the effect they thought they would. Corporations find that the merger that looked sensible on paper proves much more difficult in practice. And individuals find that what really matters in their lives isn’t always the things they thought.

For those in a hurry, the basic argument is set out below.

Hidden Wealth: The Argument

This book is about the parallel world of relationships and habits that forms the backdrop to much of the chatter of contemporary politics. My argument is simple: it’s this stuff that, for most part, makes our societies and economies work. If we try to estimate its value even in the crudest way, such as the economic value of all the time we spend supporting our friends and family, it is more than GDP. But of course, the monetary valuation alone doesn’t really do it justice. It’s the hidden wealth of nations.

This hidden wealth helps explain perhaps the biggest puzzle of contemporary economics: that richer nations are happier, yet economic growth within nations seems to have little impact on our happiness (the Easterlin paradox – see Chapter 1). Our ability to get on with our fellow citizens oils the working of markets, lowering the costs of transactions and speeding the flow of information on which economies rely. But it also affects our well-being more fundamentally. Our relationships to those around us – not just family but strangers too – have big impacts on our psychological and physical wellbeing. A society of trustworthy citizens is a platform for both economic growth and well-being.

But there are cracks in this hidden wealth. By the mid 2000s, public concerns in a number of nations – such as Britain, Spain and Denmark – had become dominated by a fear of other people. The top public concerns had become crime, immigration and terrorism – not a fear of distant others, but those in their midst. This was especially striking in Denmark, a nation otherwise long noted in social surveys as having the happiest citizens in Europe. Perhaps the most striking finding is the sheer gap between public concerns and the objective risks. Chapter 2 examines the underlying causes of these concerns, and what evidence-based policies might look like to do something about them. In many areas, the evidence base takes us in a very different direction from current policies, particularly in the Anglo-Saxon nations.

The onset of the global recession in 2008-9 has pushed some of these fears underground, with public attention shifting to unemployment and the state of the economy. But the same fears remain just beneath the surface. They colour the reaction to the recession, such as in protests against foreign workers; stories that crime will surge; or nervousness that the social order could break down within a country. Yet once again, the resilience of a community or nation to survive through economically difficult times rests heavily on its hidden wealth – not the money that its citizens have squirreled away under their mattresses, but the preparedness of citizens to help each other.

Chapter 3 shifts attention directly onto what the nature of this hidden, soft ‘economy’ is – such as our common values, the way we look after our children and elderly, or whether we trust and help strangers. The chapter examines how values have changed over the last 30 years, and how in some respects they appear not to have changed at all. Contrary to popular belief – and the widespread expectation of social commentators – religious beliefs appear to have changed very little. However, these beliefs have become less consequential for what else people believe, with the notable exception of North America. Across Europe, religious beliefs have become hollowed out. But this has not been associated with a general ‘moral decline’ – though people have become more relaxed about personal-sexual behaviour, they have become less tolerant in relation to many acts of self-interest.

A common belief of leading politicians is that globalization is leading the values of nations to become more similar, while at home nations are becoming more diverse as a result of immigration and marketization. There can be no doubt that nations share some common challenges, such as the risks and benefits of integrated financial markets on the one hand or of global warming on the other. But analysis shows that in terms of values, this common belief is wrong. Nations are actually becoming less similar in terms of values, with value divergence even within the OECD. Yet within nations, the most common pattern is value convergence. This remarkable result suggests that despite the power of globalization, there remains a dynamic within nations that is even more powerful in the moulding of our common values. The winds of globalization may be driving nations in the same general direction, but we are at the same time also drifting apart.

Another important but subtle change in Western societies is that, although the market economy may have become more dominant in our minds and our political narratives, we are spending less and less time in paid work. As the great economist Keynes predicted – and even despite the current recession – economic growth is gradually setting us free to do other things with our time. Much of this time is spent in the ‘economy of regard’ – a world of friendship, care and gift-based exchanges over which conventional economics has little to say but that for most people is what makes life worth living. In this sense, there is something fundamentally wrong with the dominant gestalt of our economics and politics – its foreground is the citizen’s background. Is there anything the state can do to support this alternative world of relationships and exchange? I think the answer is yes – if we want it to. Chapter 3 starts to explore what kind of policies this might lead to, such as the support of ‘complementary currencies’ to oil the works of the economy of regard in much the same way as conventional currencies oil the ‘real’ economy.

Any account of contemporary society is not complete without a consideration of inequality and fairness. This is examined in Chapter 4. Globally, inequality has risen over the last 150 years, but mainly because inequality between countries has become larger. But there is also great variation in levels of inequality between countries, from the yawning gulfs between rich and poor in South America to the relatively narrow gaps within the Scandinavian nations. In respect of inequality, hidden wealth takes on a darker tone. It is argued that one of the reasons that policy efforts to reduce inequality and increase social mobility tend to under-deliver is because efforts focus on inequalities in relation to the conventional economy, such as income or qualifications. Policymakers have been far less successful at addressing the other kinds of capitals that explain persistent inequalities in society. These include inequalities in financial capital, soft skills, social networks and cultural capital. At the same time, public support for addressing inequality and fairness through conventional means, such as through further income support, is close to its limit in many countries.

We need to find ways of addressing inequalities and fairness that tap into these hidden forms of wealth, rather than fight against them. The laissez-faire approaches of the traditional right will clearly make the problem worse. The rational ‘Weberian’ welfare state, as favoured by the traditional left, faces the dual challenge of lack of public support and a failure to get to the deeper dynamics that underlie inequality. The alternative of ‘affiliative welfare’ is instead explored. This involves strengthening our support of those that we have some relationship to and stretching it to reach a little further than it might otherwise do. The model leads to some surprising policy conclusions. If we do it right, this approach can also change how we feel about the society around us, and help build the reservoirs of our collective hidden wealth. Perhaps the biggest driver of inequality within countries is the acceptability of income and other differences. Interestingly, recessions change these attitudes, leading to greater sympathy for the disadvantaged and more intolerance for the excesses of the very rich. These value changes can in turn have substantial and lasting impacts.

The changing role of government is considered in Chapter 5. It is examined from three different viewpoints: the division of power (the classic state); the provision of public goods (the practical state); and the guiding of citizen behaviour (the paternalistic state).

In terms of power, a number of common beliefs are debunked, such as the idea that there has been a collapse in trust in politicians, political engagement and political interest. But other concerns are identified, such as the growing dominance of more affluent and advantaged citizens in the arena of alternative political activity and the falling salience of politics compared with other domains of life. The case is examined for the greater use of new forms of democratic engagement, such as citizens’ juries and forums. These mechanisms offer ways of addressing the social skew in engagement while respecting the desire of most citizens not to spend their lives engaged in politics.

The expansion of the state into the provision of public services has been one of the great innovations of the post-war period. The discussion reflects on what we have learnt about how public services can be not just ‘delivered’ but ‘co-produced’ with citizens. It examines the implications for how we measure, incentivize, and empower through public service provision.

The state has also become re-engaged in the shaping of citizen behaviour, not only in relation to where our behaviour affects others (such as anti-social behaviour or the environment) but where the costs fall mainly on ourselves (such as obesity). The insights of behavioural economists have changed the policy landscape, illustrating the vulnerability of citizens to ‘behavioural predators’ and giving powerful new tools to policymakers. But policymakers need the permission of citizens to use such tools, powerfully reinforcing the case for the wider use of new democratic innovations.

The state, in partnership with citizens, has the ability to greatly improve the quality of our lives. But its effectiveness also rests substantially on the hidden wealth of nations – the character of its citizens and their relationships to each other – and states neglect this at their peril.

In the final concluding chapter, a shortlist of some of the most promising policy ideas for the next decade is identified. This includes a mix of ideas, some specifically aimed at boosting and building on the hidden wealth of nations, others which are just sensible ideas whose time has come.

1

Prosperity and Well-being

… for the first time since his creation man will be faced with his real, his permanent problem – how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.

Keynes, Economic Possibilities for our Grandchildren (1930)

I hate the 7.45a.m. train from Cambridge to London. It’s a good train in principle. I can see the kids at breakfast, and get into Whitehall a minute or two after 9a.m. But it’s a good time for everybody else as well, so unless you get to the station very early and stand in just the right spot, you won’t get a seat.1

It’s not just that you have to stand for an hour that makes it mildly unpleasant, it’s that it makes my fellow travellers sources of inconvenience and hassle. As the incoming train draws into the platform, we all huddle forward, bunched around where the doors will come to rest. Some will have misjudged their spot to stand, their closeness to the platform edge rendered worthless by the twenty other people that stand between them and the train doors. Meanwhile, ranged opposite us are the people in the train ready to get out. The two packs silently size each other up, like two rugby scrums about to engage. The doors open and we’re off! Thank god we’re English. Against all the odds, the cold but focused commuters hold back, parted like the Dead Sea to let the arrivals off. But at a certain moment the discipline will break – especially if one of the arrivals dare dawdle – and we surge forward to get on. If the discipline breaks early – perhaps we have a tourist in our midst – there will be ‘tusking’ and shaking of heads, but it will be everyone for themselves.

I have a double disadvantage. I am carrying a fold-up bike and, even worse, am prone to be over-polite, the mixed blessing of a minor public school education. But I am also a reasonably old hand, and do sometimes get a seat, albeit with guilt. Still, best to take the 6.45, though even that’s getting pretty tight now too.

Of course, crowded commuting is not unique to the UK. Commuters in the wealthy cities of New York and Tokyo have long endured their crowded subways, a pattern that economic growth often brings. In the booming city of Mumbai, Indian officials now refer to ‘super-dense crush load’ to refer to times when commuters now regularly exceed train capacities by two and a half (compared with the UK’s peak excess of a mere 1.76).

Markets and Well-being

Well-being is not the only justification that can be used for wanting economic prosperity, but it’s a pretty good start. This chapter looks at this relationship, and also offers some thoughts about what we might do to boost economic prosperity in its own right.