Must Wales fail? Karel Williams ESRC Centre for Research on Socio-Cultural Change cresc.ac.uk

Financial crisis and Wales? Hard times/worse times because financial crisis ended the 30 year enterprise experiment under Thatcher and Blair Wales needs to reframe its problems and adopt radical new policies; economically challenged like the other ex industrial regions of North and West but with the political advantage of devolution 1.Social settlement : state filled in for an anaemic private sector = de facto regional policy which eased downward mobility for Wales 2.Economic renewal? not structural reforms plus bolt on industrial policy; scope for regional and local guerrilla economic development, devolution with an economic purpose

(2) Old social settlement: the state fills in

Filling in: Public spend (as regional policy) Under Thatcher and Blair the public sector filled in for an anaemic private sector that couldn’t create jobs; spending on HEWS = de facto regional policy as Wales plus rest of the North and West went ex-industrial Historical long view (using health, education and public administration as proxy): 2/3rds of extra jobs post 1979 ex public sector; official stats confused by utility privatisation under Mrs T or publicly funded private employers under Blair New Labour’s record: no net private sector job creation in the ex industrial regions like North East or West Midlands (CRESC WP 75); little autonomous job growth outside London which accounts for 43% of all extra FT jobs created between

Thatcher: Total 2,362k Private 1,483k (62.8%) Public 879k (37.2%) Major: Total -1,121k (0%) Private -1,314k (0%) Public 193k (100%) Blair: Total 3,721k Private 2,320k (62.3%) Public 1,401k (37.7%) Thatcher - Major: Total 1,241k Private 169k (13.2%) Public 1,072k (86.4%) Brown: Total -623k Private -1,078k (0%) Public 455k (100%) Blair - Brown: Total 3,098k Private 1,242k (40.1%) Public 1,856k (59.9%)

Falling behind: North and West ex industrial regions 30 years of growing gap between London and the regions (and within London): London GVA per capita X 2 in regions like North East, West Midlands and Wales End of a trajectory by 2008 because filling in required continuous increases in public expenditure a.New Labour ramped public expenditure and hit 3% budget deficit i.e. Maastricht limit b.Financial crisis required public expenditure cuts i.e. Darling’s £44billion vs Osborne’s £81 billion downturn worsens imbalance on jobs.... before the cuts bite

(3) Economic renewal: a purpose for devolution?

Tired old economic paradigm and industrial policy Old paradigm under Mrs T and New Labour = structural reforms e.g. low taxes, flexibilised labour, deregulation; with regional policy as infrastructure and work force training (no activity relocation) Exhausted but lives on with Osborne’s “growth strategy” = <corporation tax plus <worker protection plus <planning controls and enterprise zones (again) Now with added industrial policy i.e. Cable style interventionism (a) central state (b) financial incentives via tax breaks and bank reform (b) encourage virtuous productive sectors = lists of sectors like autos, advanced engineering, games (c) visions of export success Won’t do much for Wales economically: there aren’t enough jobs in this strategy; its 30 years too late for Llanelli steel, tinplate and car components

Centralised political power: London as a city state London’s success determines your failure: centralisation of economic wealth is underwritten by political power Infrastructure claims; Crossrail and East/West axis in London and South East requires £50k per new house Labour market disconnects: London imports non-Brits with right skills at top and bottom; regions left with redundant skills and low wage/ immobile workforce (c.f. 1930s) Why is this not a political issue? (a) financial elites speak for London as “City State” with City of London Corporation, elected mayor (b) mass parties decline so Westminster is metropolitan cliques with finance providing 50% of national Tory party funding Wales has a political advantage; devolved regional government in Wales provides a basis for political resistance and economic imagination which the North East or West Midlands don’t have

Economic renewal via guerrilla development? Can regional and local authorities do what the central state can’t do/won’t do? Focus on mundane activities which are major employers; not only the public sector but also (a) the para state of publicly funded private firms now ⅓ of public sector (b) link sectors e.g. food processing -feeds supermarkets and largest consumer of machinery Regulate for sustainable chains (not point definition of success); (a) visions of import substitution: why is 80% of our bacon imported? (b) regional and local challenge on CSR; utilities and supermarkets with what have you done for us locally in return for household spend of £100 per week Redirect financial flows e.g. using pension funds for local housing with 5% return and seek tax and revenue sources: model of 1890s Birmingham with gas and water socialism ex utility revenues Can Wales lead on guerrilla economic development? You don’t need more legislative power to challenge a supermarket

Limits of the Welsh socio political imaginary Praise the Lord, we are a public service nation; a nation led by a public service middle class as our genealogies show e.g. Rhodri Morgan first minister, son of Prof T J Morgan, brother of Prys Morgan; public service middle class did well out of the Thatcher /Blair settlement which was disaster for the organised working class now confined to the public sector The Welsh public service middle class has many qualities but lacks a radical economic imagination; part of a historic division of labour; our middle class managed the politico-social while large scale capital and private management was provided by the English outsiders; it used to be Steel Company of Wales and now its Serco The issue isn’t political nationalism but economic conviction: how we perform nationality; can we commit to radical economic renewal or will we hesitate and become the Woody Allen of the Celtic nations.