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Knowledge and Growth: What Paul Romer’s Economics Nobel Prize Says About Africa’s Infrastructure Obsession

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If knowledge and human capital are the engines of economic growth, what is the role of the foreign investment and infrastructure edifices that our governments are obsessed with? By DAVID NDII.

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Knowledge and Growth: What Paul Romer’s Economics Nobel Prize Says About Africa’s Infrastructure Obsession
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The Nobel Prize season is one of the things I look forward to, not least because there is a prize in economics. But the more important reason is that it is always a welcome reminder that humanity’s most important work is not done by the powerful, the moneyed and the celebrities that hog the daily limelight, but by the people of ideas and ideals. And in these dog days of an apocalyptic time, it could not come often enough.

This year’s economics Nobel Prize was shared by William Nordhaus and Paul Romer for contributions to natural resource economics and economic growth respectively. The commonality between their work is rather technical and I shall not go into it, but it has to do with developing methods of analyzing the interaction of the economy with complex phenomena — in Nordhaus case, climate, and in Romer’s, knowledge. The latter is the subject of this column.

Romer pioneered what is now known as new or endogenous growth theory. Hitherto, economists treated knowledge and technical progress as “exogenous”, that is, something that occurred outside the economic system. This was quite awkward since it was quite obvious that research and innovation were fundamental elements of the economic system.

This year’s economics Nobel Prize was shared by William Nordhaus and Paul Romer for contributions to natural resource economics and economic growth respectively. The commonality between their work…has to do with developing methods of analyzing the interaction of the economy with complex phenomena — in Nordhaus case, climate, and in Romer’s, knowledge.

Another seminal contribution was made by Robert Lucas, the 1989 Nobel Laureate. There is an interesting backstory to his prize. Seven years before, his ex-wife had inserted a clause in their divorce settlement that entitled her to half the prize money if he won it. The prize came 21 days before the provision lapsed. Romer’s prize has an interesting backstory too: he is the second chief economist of the World Bank to leave the institution acrimoniously only to be awarded the Nobel Prize shortly thereafter— the other one is Joseph Stiglitz.

Paul Romer’s model emphasizes the role of knowledge in long run economic growth; Lucas model emphasizes human capital. The two are intimately related but are not the same thing, although many people, including economists, often conflate them. Let me illustrate.

I came across a trending story—about a young Philippino inventor who had just successfully tested his passenger drone in the provincial city of Batangas, Watching the video, his geek-in-a garage drone is as good as those that have been showcased by tech companies with lots of venture capital money. In fact, it looked more fun to fly than the ones I have seen before. And the guy is not even an engineer. And he built it in a garage. An Australian company was sufficiently impressed to propose a commercial partnership. It was then brought to my attention, pleasantly so, that a young Kenyan, Morris Mbetsa, has built and tested one—he tweeted me video footage.

“How to build a passenger drone” i.e. the science and engineering is knowledge—that’s Romer.. The ability of a geek in a garage in Batangas and Ong’ata Rongai to use that knowledge to build a drone in a garage in Banda is human capital— that’s Lucas. One can think of Romer’s model as explaining how the world becomes more prosperous; Lucas’ as explaining why we see developing countries catching up with rich countries. When the Wright brothers made their maiden flight in 1903, it was hard to imagine a native in the colonies somewhere in Africa or Asia making a viable attempt to manufacture an aircraft. A couple of decades ago it took an entire national industrial project to make “Nyayo Pioneer”, the ill-fated contraption that stalled on the track in Kasarani stadium on the occasion of its launch. All the same, from the look of things your future personal transportation could well be made in Kariobangi.

How to build a passenger drone’ i.e. the science and engineering is knowledge—that’s Romer.. The ability of a geek in a garage in Batangas OR Ong’ata Rongai to use that knowledge to build a drone in a garage in Banda is human capital— that’s Lucas.

If knowledge and human capital are the engines of economic growth, what is the role of the foreign investment and infrastructure edifices that our governments are obsessed with?

The title of one of Lucas’s less well known papers on the subject, published in the 1990 edition of the American Economic Review, poses the following question: Why doesn’t capital flow from rich to poor countries? The article links investment, human capital and growth in a simple and intuitive manner. Suppose there are only two countries, a rich and a poor one – let’s call them America and Bangladesh. Average monthly factory wages in the two countries are $1800 and $60 respectively – that is, wage in America is 30 times more than in Bangladesh. At first, they do not trade. Each country makes its own clothes. Suppose they decide to trade?

Let us say it takes a worker one hour to stitch together a pair of jeans. In America, the labour cost for this is $11.25. In Bangladesh, it would cost $0.325. Even if productivity in Bangladesh was only a third of America, it would still cost a dollar to stitch the pair of jeans in Bangladesh. Let us say Made in America sold for $50. The retailers could sell Made in Bangladesh jeans at $45 dollars and still make $5 more. Off-shoring garment factories to Bangladesh would be very profitable. This would continue until Bangladeshi wages rise to the point where cost of production is the same in both countries. As it happens, the wage figures cited are quite close to what the actual wage costs in America and Bangladesh are. And indeed Bangladesh is now second to China in garment exports, earning US$ 28 billion last year, and employing over four million people.

The garment making industry makes a good example because it is a very basic skill that we can reasonably expect people with little or no education to learn quickly and do as well as better educated ones. Using similar analogy with US and India, but with more sophisticated data and mathematics, Lucas demonstrated that at the time he was writing, the return on capital in India would have been 58 times more than in the US. This then begs the question: with profitable opportunities of this magnitude why are poor countries not inundated with investment?

But once you move from low tech manufacturing like stitching garments, offshoring becomes a little more challenging. It takes armies of engineers and techies to manufacture commercial jetliners and all manner of scientists to do pharmaceutical research. Using very basic measures of education attainment, Lucas’ model demonstrates that once differences in human resource base are taken into account the potential returns to capital in India reduce to just 4% above the US.

In a previous column, I used similar data to show how initial differences in human capital may give answers to the questions that can’t seem to stop Africans from scratching heads: how it is that countries we are told we were “at par” with at or shortly after independence took off, and we did not. In 1970, the Kenyan workforce had an average of two years of education per person, and was the highest in the region. South Korea’s had six, Singapore five and Malaysia four years per person. In fact, South Korea’s education attainment was higher than several European countries including Portugal (3), France (4.8), Spain (5.6) and Italy (5.6) years per person. South Asia by contrast was in the same league with Africa—India (1.6), Pakistan (1.6) and Bangladesh (1.4). Sri Lanka is an outlier with 6.4.

Education attainment data provide only a rough approximation of human capital, even though the data have proved to be quite robust in economic research. The World Bank has recently published its latest national wealth accounts, in a report titled The Changing Wealth of Nations. National wealth accounting is a new statistical initiative that responds to the shortcomings of gross domestic product (GDP) as a measure of economic performance. As many readers will know, GDP and its derivatives are measures of production and expenditure, which in business accounts correspond roughly to annual turnover. As currently constructed, national economic accounting does not produce the equivalent of balance sheets, that is, the assets and liabilities of a business. To illustrate, the Jubilee administration has borrowed KSh 3.5 trillion but there is no account where we have recorded the value of assets acquired with these loans. One of the assets financed, the SGR railway, has cut through the Nairobi National Park. We ought to be able to revalue the park to reflect the loss of both economic and ecological value caused by the railway, but there is no way of doing that in the GDP system. This is what national wealth accounting seeks to remedy.

This latest version, which provides wealth accounts for the year 2014 has what the Bank says is the “first sound estimates of human capital”. With wealth accounts we are able to compare the relative importance of different assets in a nation’s wealth directly. What do they tell us? First, that human capital accounts for two-thirds of the world’s wealth. Second, the wealthier the country the higher the proportion of human capital in its wealth portfolio. It ranges from 40 percent in low income countries, to 70 percent in the high-income OECD countries (See chart below). In the wealthiest region, North America, human capital accounts for 77 percent of total wealth, compared to half of national wealth in Sub-Sahara and South Asia. The Middle East/North Africa is an outlier with only a third of its wealth in human capital on account of the region’s unusually high oil wealth.

National investment rates in most developing countries are between 15 to 25 percent of GDP while expenditures on education and health (both public and private) are between 5 and 10 percent of GDP. Roughly, this suggests that a dollar invested in people generates five times as much wealth as a dollar investment in other assets. This should not surprise—think of a million shillings invested in an engineering degree against the same amount invested in a rental apartment.

Human capital accounts for two-thirds of the world’s wealth. […] the wealthier the country the higher the proportion of human capital in its wealth portfolio. It ranges from 40 percent in low income countries, to 70 percent in the high-income OECD countries… In the wealthiest region, North America, human capital accounts for 77 percent of total wealth, compared to half of national wealth in Sub-Sahara and South Asia. The Middle East/North Africa is an outlier with only a third of its wealth in human capital on account of the region’s unusually high oil wealth.

Eight years ago, the African Development Bank (AfDB) published a report in which it estimated that Africa has an infrastructure financing requirement of US$ 93 billion a year to the year 2020. The figure was subsequently adjusted upwards to $120 billion a year— a cumulative figure of 1.2 trillion dollars. Consequently, less than two decades after the HIPC (Highly Indebted Poor Countries) debt forgiveness initiative many African countries are now hurtling towards a second debt crisis.

It is stated in the AfDB report that the purpose of building on this scale is to crowd in the investment to create jobs. Texas Instruments was the first Western company to invest in Bangalore. I came across a photograph of the first equipment Texas Instruments delivered to its first facility, in a bullock cart. Texas Instruments was attracted by Indian workers, not its roads. In fact, there is no account of India’s tech boom that does not mention the Indian Institutes of Technology (IITs). It is now said that IIT graduates are now India’s leading export to the US.

Eight years ago, the African Development Bank (AfDB) published a report in which it estimated that Africa has an infrastructure financing requirement of US$ 93 billion a year to the year 2020…The figure was subsequently adjusted upwards to $120 billion a year— a cumulative figure of 1.2 trillion dollars. Consequently, less than two decades after the HIPC (Highly Indebted Poor Countries) initiative many African countries are now hurtling towards a second debt crisis.

In all the documents and discussions I have encountered, there is no acknowledgement that Africa does not have the skills—the engineers, architects and builders—to scale up building on anything close to this scale of investment, and to maintain it subsequently. Let us do the math. An engineering degree on the continent is at most $25000. The $120 billion annual “infrastructure deficit” budget works out to six million engineers. That is a whole passenger drone industry right there. And of course, once we are zipping in drones, we will not be needing so many roads.

In all the documents and discussions I have encountered, there is no acknowledgement that Africa does not have the skills—the engineers, architects and builders—to scale up building on anything close to this scale of investment, and to maintain it subsequently.

There is no evidence in economics that infrastructure investment contributes to economic growth.

This conclusion by the Asian Development Bank is typical:

“The main conclusion is that a number of countries in developing Asia have significantly improved their basic infrastructure endowments in the recent past, and this appears to correlate significantly with good growth performances. However, the evidence seems to indicate that this is mostly the result of factor accumulation (a direct effect), while the impact on productivity is inconclusive.” – Stéphane Straub and Akiko Terada-Hagiwara (2010) “Infrastructure and Growth in Developing Asia” ADB Economics Working Paper Series No. 231.

Mwalimu Nyerere: Development which is not development of the people may be of interest to historians in the year 3000. It is irrelevant to the kind of future which is created. Thus, for example, the pyramids of Egypt and the Roman roads of Europe, were material developments which still excite our amazement. But because they were only buildings and the people of those times were not developed, the empires, the cultures, of which they were a part have long ago collapsed. The Egyptian culture of those days—with all the knowledge and wisdom which it possessed—was quickly overthrown by foreign invaders because it was a culture of a few; the masses were slaves who simply suffered because of the demands of this material development, and did not benefit from it.

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David Ndii is a leading Kenyan economist and public intellectual.

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Education in Rwanda: A Long Walk to the Knowledge Economy

If Rwanda is to attain its stated ambition to become of a middle-income country by 2035 driven by the knowledge economy, then it must inject significant investments in the education and related sectors.

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Rwanda has shown commitment to bring improvements to its education sector. The development of Human capital that involves the enhancement of the education and health sectors was one of the main pillars of Rwanda’s development programme launched in 2000 to transform the country into a middle income state driven by the knowledge economy by 2020. Many developed countries joined in to financially support Rwanda to fulfil its development ambitions.

But while Rwanda did not meet its target to transform into a middle-income state by 2020, it has nevertheless made progress in the education sector that should be recognised. The country has now near-universal access to primary education with net enrolment rates of 98 per cent. There are also roughly equal numbers of boys and girls in pre-primary, primary and secondary schools in Rwanda. Compared to other sub-Saharan African countries, Rwanda has made great improvements in the education sector based on the gains made in primary school gross enrolment, out-of-school and retention rates and considering that the country came out of a genocidal civil war in the 1990s. Those of us living and travelling across the country can also see that the government of Rwanda has built more schools across the country to address congestion in classrooms.

However, education in Rwanda is faced with serious challenges which, if not addressed, the country will not attain its ambition to become a middle-income by 2035 and a high-income by 2050. The World Bank’s comparison with middle- and high-income countries, to whose ranks Rwanda aspires to join, shows that Rwanda lags far behind in primary and lower secondary school completion levels.

The gains made in education are not equally distributed across Rwanda. There are, for instance, wide disparities in lower secondary education by income and urban–rural residence. Whereas lower secondary school gross enrolment ratio level is 82 per cent in urban areas, it is only 44 per cent in rural areas. Moreover, transition rates between primary and lower secondary education are 53 per cent in urban areas, and 33 per cent in rural areas. School completion is 52 per cent among the richest quintile while it is 26 per cent among the poorest. Any future development strategy is unlikely to succeed if it does not provide basic equality of opportunity for all in Rwanda.

The standard of education in Rwanda is another major challenge. At the end of Grade 3, 85 per cent of Rwandan students were rated “below comprehension” in a recent reading test, and one in six could not answer any reading comprehension question. In my view, the quality of education has been partly affected by the abrupt changes in the language of instruction that have taken place without much planning since 2008.

Any future development strategy is unlikely to succeed if it does not provide basic equality of opportunity for all in Rwanda.

Learning levels in basic education remain low in Rwanda.  Children in the country can expect to complete 6.5 years of pre-primary and basic education by the age of 18 years. However, when this is adjusted for learning it translates to only about 3.8 years, implying that children in Rwanda have a learning gap of 2.7 years. This is a concern.

Education in Rwanda is also impended by high levels of malnutrition for children under 5 years. Although there have been improvements over time, malnutrition levels remain significantly high at 33 per cent. Malnutrition impedes cognitive development, educational attainment, and lifetime earnings. It also deprives the economy of quality human capital that is critical to Rwanda attaining its economic goals and sustaining its economic gains. In 2012, Rwanda lost 11.5 per cent of GDP as a result of child undernutrition.

Because of low learning levels and high levels of malnutrition in children under 5 years, Rwanda has consistently ranked below average on the World Bank’s Human Capital index since 2018, the year the index was first published. HCI measures which countries are best at mobilising the economic and professional potential of their citizens.

If Rwanda is to develop the competent workforce needed to transform the country into a knowledge-based economy and bring it into the ranks of middle-income states, the government must put significant public spending in basic education. This has not been the case over the past decades. According to the World Bank, Rwanda’s public spending on primary education has been significantly lower than the average for sub-Saharan African countries with similar coverage of primary school level as Rwanda. This low spending on primary education has translated into relatively modest pay for teachers and low investment in their professional development which in turn affects the provision of quality education in Rwanda. The government recently increased teachers’ salary but the increment is being eroded by, among other things, food price inflation in Rwanda.

Malnutrition impedes cognitive development, educational attainment, and lifetime earnings.

Going forward, Rwanda’s spending on education needs to be increased and allocated to improving standards. Considering that the underlying cause of the high rate of malnourishment in children is food insecurity, the government needs to spend more on the agriculture sector. This sector employs 70 per cent of the labour force but has received only 10 per cent of total public investment. Public investment in Rwanda has in the past gone to the development of the Meetings, Incentives, Conferences and Exhibitions sector rather than towards addressing pressing scarcities. This approach must be reviewed.

Increasing public expenditure in education and connected sectors should also be combined with strengthening accountability in the government institutions responsible for promoting the quality of education in basic schools and in promoting food security and livelihoods in Rwanda. This is because not a year goes by without the office of the Rwanda auditor general reporting dire inefficiencies in these institutions.

Strengthening institutional accountability can be achieved if the country adapts its consensual democracy by opening up the political space to dissenting voices. Doing so would surely enhance the effectiveness of checks and balances across institutions in Rwanda, including in the education sector, and would enable the country to efficiently reach its development targets.

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No Imperialist Peoples, Only Imperialist States

Adam Mayer praises a new collection, Liberated Texts, which includes rediscovered books on Africa’s socialist intellectual history and political economy, looking at the startling, and frequently long ignored work of Walter Rodney, Karim Hirji, Issa Shivji, Dani Wadada Nabudere, A. M. Babu and Makhan Singh.

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No Imperialist Peoples, Only Imperialist States
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Liberated Texts is a magnificent, essential, exciting tome that feels like a bombshell. This incredibly rich collection is a selection that is deep, wide, as well as entertaining. The book focuses on twenty-one volumes from the previous one hundred years, with a geographical range from the UK, the US, Vietnam, Korea, the Peoples Republic of China, the Middle East, Ireland, Malaysia, Africa (especially East Africa), Europe, Latin America, and the former Soviet Union, focusing on books that are without exception, foundational.

The collection is nothing less than a truth pill: in composite form, the volume corrects world history that Howard Zinn’s The People’s History of the United States offered for the sterile, historical curriculum on domestic (US) history. The volume consists of relatively short reviews (written by a wide collection of young and old academics and activists from every corner of the globe) but together they reflect such a unified vision that I would recommend Liberated Texts as compulsory reading for undergraduate students (as well as graduates!) Although the text is a broad canvas it speaks to our age (despite some of the reviewed book having been written in the 1920s).

Each review is by default, a buried tresure. The writer of this very review is a middle-aged Hungarian, which means that some of the works and authors discussed were more familiar to me than they would be to others. For example, Anton Makarenko’s name was, when the author grew up in the People’s Republic of Hungary, a household word. Makarenko’s continued relevance for South America and the oppressed everywhere, as well as his rootedness in the revolutionary transformations of the Soviet experiment, are dealt with here marvellosly by Alex Turrall (p. 289). In loving detail Turrall also  discusses his hero the pedagogue Sukhomlinsky’s love for Stalinist reforms of Soviet education (p. 334).

There is one locus, and one locus only, where death is given reign, perhaps even celebrated: in a Palestinian case (p. 133) the revolutionary horizons are firmly focused on the past, not on any kind of future. The entire problematic of Israeli society’s recent ultra right-wing turn (a terrible outcome from the left’s point of view) is altogther missing here. Yet it is difficult to fault the authors or editors with this (after all, they painstakingly included an exemplary anti-Nazi Palestinian fighter in the text, p. 152) but it might be in order to challenge a fascination with martyrdom as a revolutionary option on the radical left.

In every other aspect, Liberated Texts enlightens without embarrassment, and affirms life itself. Imperialism is taken on in the form of unresolved murders of Chinese researchers in the United States as a focus (p. 307), and in uncovering the diabolical machinations of the peer-review system – racist, classist, prestige-driven as it is (p. 305).

The bravery of this collection is such that we find few authors within academia’s tenure track: authors are either emeriti, tenured, very young academics, or those dedicated to political work: actual grassroots organizers, comrades at high schools, or as language teachers. This has a very beneficial effect on the edited volume as an enterprise at the forefront of knowledge, indeed of creating new knowledge. Career considerations are absent entirely from this volume, in which thankfully even the whiff of mainstream liberalism is anathema.

I can say with certainty regarding the collection’s Africanist chapters that certain specialists globally, on African radical intellectual history, have been included: Leo Zeilig, Zeyad el-Nabolsy, Paul O’Connell, Noosim Naimasiah and Corinna Mullin all shed light on East African (as well as Caribbean) socialist intellectual history in ways that clear new paths in a sub-discipline that is underfunded, purposely confined to obscurity, and which lacks standard go-to syntheses especially in the English language (Hakim Adi’s celebrated history on pan-Africanism and communism stops with the 1950s, and other works are in the making).

Walter Rodney, Karim Hirji, Issa Shivji, Dani Wadada Nabudere, A. M. Babu, Makhan Singh are the central authors dealt with here. Rodney is enjoying a magnificent and much deserved renaissance (but this collection deals with a lost collection of Rodney’s 1978 Hamburg lectures by Zeilig!) Nabolsy shows us how Nyerere’s Marxist opposition experienced Ujamaa, and Tanzanian ’socialism’. Nabudere – a quintessential organic intellectual as much as Rodney –  is encountered in praxis as well as through his thought and academic achievements in a chapter by Corinna Mullin. Nabudere emerges as a towering figure whose renaissance might be in the making right at this juncture. Singh makes us face the real essence of British imperialism. Nabudere, Babu and even Hirji’s achievements in analysing imperialism and its political economy are all celebrated in the collection.

Where Shivji focuses on empire in its less violent aspect (notably NGOs and human rights discourse) powerfully described by Paul O’Connell, Naimasiah reminds us that violence had been as constitutive to Britain’s empire, as it has been to the Unites States (in Vietnam or in Korea). An fascinating chapter in the collection is provided by Marion Ettinger’s review of Richard Boyle’s Mutiny in Vietnam, an account based entirely on journalism, indeed impromptu testimony, of mutinous US soldiers tired of fighting for Vietnam’s landlord class.

Many readers of this anthology will identify with those veterans (since the collection appears in the English language) perhaps more than with East Asia’s magnificent, conscious fighters also written about in the book. Even in armies of the imperialist core, humanity shines through. Simply put, there are no imperialist peoples, only imperialist states.

Zeilig’s nuanced take on this important matter is revealed in Rodney’s rediscovered lectures. Also, the subtlety of class analysis in relation to workers versus peasants, and the bureacratic bourgeoisie profiting from this constellation (p. 219) brings to mind the contradiction that had arguably brought down Thomas Sankara, Burkina Faso’s anti-imperialist president who nevertheless found himself opposing working class demands. Rodney’s politics in Guyana invited the same fate as Sankara, as we know.

Nabolsy’s review on Hirji’s The Travails of a Tanzanian Teacher touches on very interesting issues of Rodney’s role especially in the context of Ujamaa and Nyerere’s idiosyncratic version of African socialism. Nabolsy appreciates Nyerere efforts but analyses his politics with great candour: Ujamaa provided national unification, but failed to undermine Tanzania’s dependency in any real sense. The sad realization of the failure of Tanzania’s experience startles the reader with its implications for the history of African socialism.

On an emotional and personal level, I remain most endeared by the Soviet authors celebrated in this text. So Makarenko and Sukhomlinsky are both Soviet success stories and they demonstrate that this combination of words in no oxymoron, and neither is it necessarily, revisionist mumbo-jumbo. Their artificial removal from their historical context (which had happened many times over in Makarenko’s case, and in one particular account when it comes to Sukhomlinsky) are fought against by the author with Leninist gusto.

Sukhomlinsky had not fought against a supposedly Stalinist education reform: he built it, and it became one of the most important achievements of the country by the 1960s due partly to his efforts. The former educational pioneer did not harm children: he gave them purpose, responsibility, self-respect, and self-esteem. The implication of Sukhomlinsky and Makarenko is that true freedom constructs its own order, and that freedom ultimately thrives on responsibility, and revolutionary freedom.

As this collection is subtitled Volume One, it is my hope and expectation that this shall be the beginning of a series of books, dealing with other foundational texts, and even become a revolutionary alternative to The London Review of Books and the New York Review of Books, both of which still demonstrate how much readers crave review collections. Volumes like Liberated Texts might be the very future of book review magazines in changed form. A luta continua!

This article was first published by ROAPE.

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We Must Democratize the Economy

In the UK, prices for basic goods are soaring while corporations rake in ever-bigger profits. The solution, Jeremy Corbyn argues, is to bring basic resources like energy, water, railways, and the postal service into democratic public ownership.

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Jeremy Corbyn: We Must Democratize the Economy
Photo: Chatham House, London
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On Thursday, December 15, the Royal College of Nursing went on strike for the first time in their 106-year history. Understaffed, underpaid, and overworked, tens of thousands of National Health Service (NHS) nurses walked out after being denied decent, livable pay rises. Hailed as heroes one year, forced to use food banks the next, nurses’ wages have fallen more than £3,000 in real terms since 2010; three in four now say they work overtime to meet rising energy bills.

People will remember 2022 as the year that the Conservative Party plunged this country into political turmoil. However, behind the melodrama is a cost-of-living crisis that has pushed desperate people into destitution and the so-called middle classes to the brink. We should remember 2022 as the year in which relative child poverty reached its highest levels since 2007 and real wage growth reached its lowest levels in half a century. (Average earnings have shrunk by £80 a month and a staggering £180 a month for public sector workers.) These are the real scandals.

For some MPs, this was the year they kick-started their reality TV careers. For others, this was the year they told their children they couldn’t afford any Christmas presents. For energy companies, it was the year they laughed all the way to the bank; in the same amount of time it took for Rishi Sunak to both lose and then win a leadership contest, Shell returned £8.2 billion in profit. SSE, a multinational energy company headquartered in Scotland, saw their profits triple in just one year. Profits across the world’s seven biggest oil firms rose to almost £150 billion.

Tackling the cost-of-living crisis means offering an alternative to our existing economic model — a model that empowers unaccountable companies to profit off the misery of consumers and the destruction of our earth. And that means defending a value, a doctrine, and a tradition that unites us all: democracy.

Labour recently announced “the biggest ever transfer of power from Westminster to the British people.” I welcomed the renewal of many of the policies from the manifesto in 2019: abolishing the House of Lords and handing powers to devolved governments, local authorities, and mayors. These plans should work hand in hand, to ensure any second chamber reflects the geographical diversity of the country. If implemented, this would decentralize a Whitehall-centric model of governance that wastes so much of this country’s regional talent, energy, and creativity.

However, devolution, decentralization, and democracy are not just matters for the constitution. They should characterize our economy too. Regional governments are demanding greater powers for the same reason an unelected second chamber is patently arcane: we want a say over the things that affect our everyday lives. This, surely, includes the way in which our basic resources are produced and distributed.

From energy to water and from rail to mail, a small number of companies monopolize the production of basic resources to the detriment of the workers they exploit and the customers they fleece. We rely on these services, and workers keep them running, but it is remote chief executive officers and unaccountable shareholders who decide how they are run and profit off their provision. Would it not make more sense for workers and consumers to decide how to run the services they provide and consume?

As prices and profits soar, it’s time to put basic resources like energy, water, rail, and mail back where they belong: in public hands. Crucially, this mold of public ownership would not be a return to 1940s-style patronage-appointed boards but a restoration of civic accountability. Water, for example, should be a regional entity controlled by consumers, workers, and local authorities, and work closely with environmental agencies on water conservation, sewage discharges, the preservation of coastlines, and the protection of our natural world. This democratic body would be answerable to the public, and the public alone, rather than to the dividends of distant hedge funds.

Bringing energy, water, rail, and mail into democratic public ownership is about giving local people agency over the resources they use. It’s about making sure these resources are sustainably produced and universally distributed in the interests of workers, communities, and the planet.

Beyond key utilities, a whole host of services and resources require investment, investment that local communities should control. That’s why, in 2019, we pledged to establish regional investment banks across the country, run by local stakeholders who can decide — collectively — how best to direct public investment. Those seeking this investment would not make their case with reference to how much profit they could make in private but how much they could benefit the public as a whole.

To democratize our economy, we need to democratize workplaces too. We can end workplace hierarchies and wage inequalities by giving workers the right to decide, together, how their team operates and how their pay structures are organized. If we want to kick-start a mass transfer of power, we need to redistribute wealth from those who hoard it to those who create it.

Local people know the issues facing them, and they know how to meet them better than anyone else. If we want to practice what we preach, then the same principles of democracy, devolution, and decentralization must apply to our own parties as well. Local party members, not party leaders, should choose their candidates, create policy, and decide what their movement stands for.

Only a democratic party can provide the necessary space for creative and transformative solutions to the crises facing us all. In a world where the division between rich and poor is greater than ever before, our aim should be to unite the country around a more hopeful alternative — an alternative that recognizes how we all rely on each other to survive and thrive.

This alternative is not some abstract ideal to be imagined. It is an alternative that workers are fighting for on the picket line. Even before the nurses went on strike, 2022 was a record-breaking year for industrial action. Striking workers are not just fighting for pay, essential as these demands are. They are fighting for a society without poverty, hunger, and inequality. They are fighting for a future that puts the interests of the community ahead of the greed of energy companies. They are fighting for us all.

Their collective struggle teaches us that democracy exists — it thrives — outside of Westminster. The government is trying its best to turn dedicated postal workers and railway workers into enemies of the general public — a general public that apparently also excludes university staff, bus drivers, barristers, baggage handlers, civil servants, ambulance drivers, firefighters, and charity workers. As the enormous scale of industrial action shows, striking workers are the general public. The year 2022 will go down in history, not as the year the Tories took the public for fools, but as the year the public fought back. United in their thousands, they are sending a clear message: this is what democracy looks like.

This article was first published by Progressive International

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