Every crisis is a war of ideas. The legacy of Milton Friedman – the great architect of shock economics – illuminates how the fever of disaster burns away precedent; and that what is usurped and adopted is largely a question of what ideas are lying around at the time. It is the work of believers to sustain ideas until time and place collide.
When the Impact movement was born a decade ago, we had a vision: to harness the private sector to rebalance the world’s prosperity, restore the planet and transform the lives of billions. In the world of zero-sum capitalism to which Friedman was handmaiden and philosopher, this has been fringe logic, impossible to conceive at scale even as we passed every environmental, societal and ethical tipping point. Now – as Friedman himself foretold – the once-impossible is the only option.
Governments around the world have launched into an economic bungee jump: diving into the abyss and praying a for a dramatic bounceback that deposits us safely back where we began. But there is no return to normal. Covid-19 has machine-gunned our economy and the cultural norms that sustained it. There is no simple ‘exit strategy’ that eases us back in with hopes of continuity. Supply chains have been eviscerated, industries wiped out, psychological damage done.
As new normal takes shape in projection, prediction and paranoia, we confront a world on the brink of the worst economic downturn since the Great Depression of the 1930’s (IMF). One in six people in the G7 countries report having already lost at least half their income (Kantar). The UK economy could shrink by up to 35% in the second quarter, unemployment could rise by two million, leaving British households £43bn poorer in the same period (Centre for Economic and Business Research). And social distancing measures could stretch intermittently into 2022.
The consequences of economic collapse will be felt for well over 20 years. Globally, it will devastate lives, vanish progress, drain resource, destabilise societies, concentrate power, and usher in a new age of surveillance totalitarianism.
No government, however heroic its measures, can avoid this future singlehandedly.
What we know for sure is that in a post-pandemic world, we are only as strong as our weakest link. All our lives, all our livelihoods, depend on the resilience of the collective.
And so we stand at a juncture: follow the norm into inevitable conclusion – scramble to preserve the dying remnants of an obsolete worldview – or embrace the new logic. Seize this moment of collective re-visioning to future-fit a sustainable, resilient, distributed economy. Funnel capital, expertise and innovation into our left-behind communities. Close the gaps of inequality and regenerate our nation with the skills and enterprise to meet a volatile and complex world with fortitude and creativity.
The key to immediate and long-term economic recovery is confidence, collaboration and innovation. This can only come from cross-sector leadership, fuelled by the private sector and underpinned by public sector support. Anything less is just a temporary fix pulling from a dwindling pot.
We have a narrow window to implement new thinking that mobilises business as the route to economic health and empowers civil society to rebuild the social fabric of local community and local economy.
To this end, I am seeking the Prime Minister’s backing to form an Economic Recovery Team, bringing together the best of British business, investment, social enterprise and charity to deliver swift, joined up action at this moment of national emergency. The focus points will be as follows:
1. Setting out a New Contract for a resilient and prosperous Britain in a post-pandemic world: a set of binding principles that enshrine the collective spirit of this moment into a shared commitment to put equity, sustainability, long-termism and innovation at the heart of recovery – signed by leaders of business, government and civil society and embedded as a national measure of progress and accountability.
2. Identifying national, economic, future-thinking goals to bring the country back to work and to growth by early 2022. Rooted in the post-industrial economy rather than a replication of our present moment, these goals will become a national cause, catalysing a true transformation of our economy.
3. Launching a unifying national capital expenditure and jobs incentivisation plan to ensure private sector collaboration and mobilise investment, developed and led by the best of Britain: a diverse group of leaders able to martial considerable our social and financial capital from civil society, industry and impact investment sector. I am in the process of reaching out now, and would welcome engagement to ensure the highest calibre team is formed.
4. Establishing a new measure of productivity that disavows short-term labour market distortions and instead puts the dignifying and sustaining power of work at its heart: forming a measure of productivity that includes both those registered as unemployed and those between the ages of 18-64 who aren’t in the labour market so that growth always goes hand in hand with real opportunity and improved quality of life.
5. Leveraging government to support the local innovation economies and distributed regional dynamics (e.g. building local competitive advantage across city-based clusters) needed to close productivity and equality gaps and ensure inclusive growth. Modelled on Wigan’s local government approach, which successfully met severe austerity budget cuts while improving health and educational outcomes, social care provision and local economy and opportunity. This can be achieve in two parts:
5.i Launching a Deal between citizens, businesses and local government for every town that realises the New Contract at a local level; enshrining mutual principles of community and volunteering (harnessing our rejuvenated community spirit and organised volunteer force) in return for low-cost, innovative public services.
5.ii Community Investment Funds: through mentoring schemes and grants for locally-focused businesses and social enterprise – supplemented with access to high quality national skills-building programmes – local government can create decentralised ‘hotspots’ which incentivise young British businesses, restore local pride and create sustainable opportunity.
6. Establishing our own Sovereign Wealth Fund to harness our available resource in the most efficient and sustainable way, drawing (by invitation only) on the billions of dormant capital available in 10,000 state-related and other pension funds to invest in new infrastructure across the country. To engrain multi-generational thinking, 33% of the board should be under the age of 30.
7. Taking immediate action to invest capital (and liquidity) into our mid-sized companies by way of a government-backed private capital-led fund, administered region by region by the local venture capital industry. This Kick Start fund, estimated to be around £25 billion in size, will bring temporary relief to businesses who, expecting severe supply and demand pressures, will likely implement material cuts to their fixed cost-base, defer payments to suppliers and reduce labour costs. It is critical these businesses have access to capital to ensure immediate continuity.
8. Restoring people’s confidence that their ability to earn and contribute as productive and engaged members of our society will not be in continuous jeopardy by putting forward-thinking skills, training, and productivity tools at the centre of national action. Private sector leadership (supported by government) should make a unified, nation-wide skills overhaul a priority investment, and in so doing close gaps in social mobility while equipping the UK to meet the long-term challenges of climate crisis, automation and the ageing economy.
9. Passing the Purpose Companies Act – a long standing proposal from the B Corporation world, recently further developed by ‘Operation Upgrade’ and currently in draft – which makes a triple bottom line purpose mandatory for all companies, replacing s172 of the Companies Act 2006. Based on the B Corporation model which progressive companies currently adopt on a voluntary basis, this would be world-first legislation obliging all UK businesses to serve people, planet and profit – not just shareholders – putting sustainable, socially-driven enterprise at the heart of the nation and positioning Britain as the world leader in the circular economy.
10. Agreeing a national impact metric to support our Purpose Companies, which asks all businesses to account for their impact (in alignment with global efforts such as the Impact Management Project) – allowing us to consistently measure the social and environmental contribution of business and incentivise high performance, driving capital to where it is needed. The External Rate of Return has been created with the LSE and is already in use, with universal application for any start-up industry or political body.
11. Establishing task forces for each of our most vulnerable sectors, bringing leading private sector expertise together to work on creative solutions in close co-operation with government. Task force leaders are already engaged across retail, hospitality and entertainment, with more to follow. These task forces would be invited to examine the legislation restricting these industries from operating as normal in the current environment.
12. Restructuring Quangos to adhere to the standards of, or become, Companies Limited by Guarantee –making them subject to the Companies Act which enhances governance and board-level accountability while maintaining the not-for-profit purpose. This will make all non-departmental public bodies accountable and performance-focused in moments of national crisis, achieving immediate efficiencies. This should be applied to all Quasi-state organisations to dramatically improve public sector leadership.