Blog: 'Where now for construction in Scotland?', Chris Kelly - EKOS Ltd

As the construction sector looks set to gradually emerge from the shutdown, this short paper from Chris Kelly, EKOS and EDAS Board member considers some of the issues which may impact on the future of the construction sector in Scotland. 

There are three issues of critical importance that need to be at the forefront of supporting the recovery of the construction sector: innovation, skills, and low carbon and the green economy. 

See full paper here. 

Source: EKOS Consultants 

Common Weal Launches Resilience Economics

Common Weal today launches Resilience Economics, an economic framework for rebuilding Scotland's economy post-virus (read the full report here  or the summary here ). The report is backed by a list of leading economists including Costas Lapavistas, Professor of economics at the School of Oriental and African Studies, Mike Danson Professor of Enterprise Policy at Heriot Watt University,  Giorgos Kallis ecological economist and research Professor at the Catalan Institution for Research and Advanced Studies and Steve Keen, Professor of Economics and Head of the School of Economics, Politics and History at Kingston University.

This report, previewed by Douglas Fraser here, and covered in The National here and here, provides the framework Scotland needs if it is serious about 'building back better'. It is a body of economic theories which come together to form a coherent and comprehensive response to the moment in which we find ourselves – but it is also a repair for the economic failures that have burdened us and a solution to the climate crisis ahead.

It is called 'Resilience Economics' because it's about our ability to face change without the economy toppling over every time. We've had two major crises in just over ten years and our economy has barely coped with either. This can't keep happening, because climate change, resource depletion, the loss of biodiversity and constant pollution (including plastic pollution) mean more shocks to our economy are inevitable. An economy that hurts its own citizens every time change comes isn't the economy we need.

This report is not an action plan; we will start to launch that in the coming weeks. This is an explanation of what we want to achieve. A resilient Scottish economy will produce much more of what we consume. This will drive an entire industry using Scotland's copious natural resources to make high-quality, environmentally-responsible goods and materials. This will stimulate extended supply chain industries which will also be engaged in productive manufacture. These new industry sectors will create new jobs which are more productive and higher skilled and so better paid and more secure. This will be delivered by many more Scottish-owned businesses and will be rapidly stimulated by the the government and its agencies implementing a concerted plan to make it happen.

Essential elements of our life like housing, energy, food and public services will be managed in a different way than the non-essential parts of the economy where regulated free markets are appropriate. As these high-pay industry sectors develop, the low pay sectors which are failing now will be allowed to decline and new and expanding domestic businesses will be supported to 'creatively adapt' to fill the new opportunities and bring better replacement jobs. This will all be underpinned by a commitment to end environmental damage and create much greater job security for workers through a return to industrial democracy.

Because a Resilient Economy must be more productive and useful and replace low-pay and insecure jobs with high-pay, secure ones. It will do much more to prioritise domestic productive business over corporations and help and encourage those businesses to develop themselves as part of a new green economy. Property price inflation will be brought under control so excessive rents and mortgages don’t undermine the economy again. Banking will safe and boring so that a reliable and resilient banking sector can be trusted to provide crucial services.

We will reduce the volume of commercial retail and to transition away from a reliance on the low-pay service sector through a major programme of green reindustrialisation and increasing domestic manufacturing capacity, driven in large part by land-based industries making proper and responsible use of Scotland's copious natural resources. An ‘entrepreneurial state’ will implement a national industrial strategy to substantially increase the proportion of our economy which is domestically owned. Nothing in Scotland’s recovery and its subsequent reindustialisation process would be considered if it does not decrease economic inequality and poverty. We will therefore measure the success of the economy in a much more balanced way and focus on quality of life rather than corporate profits.

This is the start of change. This foundation means we need not fear what is to come, that we should greet it with enthusiasm, confident that Scotland can not only cope but thrive. We just need to leave behind the old economic tools which brought us here and accept that it is time for something new.

So download the report here and give it a read. We hope you're inspired and ready for the big launch. Sign up here to join over 1000 others to become a volunteer for our biggest campaign yer. 

Source: Common Weal

Launch of new Economics Observatory

Today, a new website has been launched – the Economics Observatory (ECO) – that aims to offer insights into the economics of the Covid-19 crisis and the recovery.

The initiative, funded by the Economic and Social Research Council (ESRC), draws on the expertise of economists from over 25 universities and research institutions from across the UK.

You can access the website at the following link – https://coronavirusandtheeconomy.com/

The Fraser of Allander Institute is part of this new exciting initiative. Professor Graeme Roy is a Lead Editor on the project, and Dr Stuart McIntyre a contributing author and editor.

The briefings are written for policy-makers, the media, the public, students and teachers who are interested in the economics of Covid-19 and the implications for households, organisations and public policy.

The website already features some interesting briefings, including:

• The epidemic and the economy: what are the trade-offs? The Covid-19 health emergency has caused economic havoc on a scale not seen in living memory. It is important to understand the interactions between the epidemic and the economy to be able to deal with the difficult trade-offs facing policy-makers and the public.
• When should schools re-open? Countries in Europe and elsewhere have taken very different strategies to getting children back to school after closures. What are the difficulties in making decisions about re-opening? And why is there so much variation among national approaches?
• How will the Covid-19 crisis affect the NHS? The lockdown was implemented largely to ‘save lives and protect the NHS’ amid fears of capacity being overwhelmed. What are likely to be the effects of the crisis on the supply of NHS healthcare, and on demand for healthcare, now and in the future?
• Why is uncertainty so damaging for the economy? The Covid-19 pandemic and policy responses have made life much more uncertain for everyone – individuals, organisations and governments. What impact does all this uncertainty have on the economy and how can policy-makers respond?
• Will Scotland’s economy be hit more or less than the UK as a whole? Just like elsewhere else, Scotland’s economy is facing unprecedented stress from the Covid-19 crisis. How it performs in the months ahead will depend on the policy choices of Scottish ministers – and how these differ, complement or cut across UK-wide policies.
• Which firms and industries have been most affected by lockdown? Almost all UK businesses have been badly affected by the crisis, but some industries have been hit harder than others. Financial market data and surveys of firms themselves provide insights into the scale of the impact on sales, employment, supply chains and business uncertainty.
• What is the likely future role of the state in the UK economy? Economic distress caused by the pandemic, the lockdown and the recession have required a big increase in public spending. How has the crisis affected the size of the state and the effectiveness of government policy?
• How is the crisis affecting inequalities across ethnic groups? There are growing concerns that the UK’s ethnic minorities are suffering disproportionately as a result of the pandemic – in terms of both their higher mortality risks and the worse economic outcomes for some groups.
• What are the lessons for today from running a wartime economy? The world continues to experience episodes that remind us of the profound disruptions of twentieth-century wartime. But how far does the war analogy stretch? Covid-19 has been able to disrupt our economy at a speed that no foreign enemy has ever matched.

How to help with the ECO
If you are an academic interested in contributing to this portal, please get in touch with Fraser of Allander.

Who’s all involved:

• Romesh Vaitilingam is Editor-in-Chief of ECO – and the lead editors are:
• Tim Besley (LSE)
• Jagjit Chadha(National Institute of Economic and Social Research, NIESR)
• Diane Coyle(University of Cambridge)
• Rachel Griffith (Institute for Fiscal Studies and University of Manchester)
• Michael McMahon (University of Oxford)
• Carol Propper (Imperial College Business School)
• Imran Rasul(University College London)
• Graeme Roy(Fraser of Allander Institute, University of Strathclyde)
• Sarah Smith (University of Bristol)
• John Turner (Queen’s University Belfast).

For more details, please visit: https://coronavirusandtheeconomy.com/

Source: Fraser of Allander Institute News

Blog: "Inclusive Growth: Finding Lost Einsteins" - Charlie Woods, SUII

Charlie Woods is EDAS's Policy and Practice
sub-group Chair and Director of the
Scottish Universities Insight Institute

“…there are many “lost Einsteins”…especially among women, minorities, and children from low-income families.”[1]

The contribution of more inclusive and equitable development to wellbeing and social justice is well recognised. Perhaps the impact on economic progress is less well appreciated. Indeed it is sometimes assumed there is a trade-off between strong economic performance and equality, sometimes referred to as efficiency v equity[2].

There is an increasing amount of evidence that there need not be a trade-off, indeed there can be considerable synergy between the two. For example, secure, fair employment, where employees having a stake in the business, can help boost innovation and productivity. Daron Acemoglu and James Robinson^[3] have argued this type of relationship is at the heart of economic development processes and distinguish between the long term performance of ‘inclusive’ and ‘extractive’ economies.

The IMF have highlighted that inequality can be damaging to economic performance.^[4] A recent book[5] by Heather Boushey of the Washington Centre for Equitable Growth focusses on how inequality ‘obstructs, subverts and distorts’ economic growth. For example, as inequality lowers aggregate demand because the better off have a lower propensity consume and save more than those at the bottom end of the income distribution. Inequality also forces the less well off into debt to finance consumption and can help make the economy more precarious and less resilient.

She also cites a relatively recent study by Alex Bell and others, that adds a further interesting dimension to this issue. By analysing data from patent records in the US and linking them to tax records, they found that children’s chances of becoming inventors are heavily influenced by characteristics at birth, such as their race, gender, and parents’ socioeconomic class. Children from families in the top 1% of income were 10 times more likely to become inventors as those from below-median income families.

Even more tellingly they found that these gaps persisted even among children who performed similarly in maths tests in early childhood - maths ability was found to be highly predictive of innovation success in later life. This suggests that there is likely to be significant innovative potential being stifled through inequality and it led them to coin the term ‘lost Einsteins’ to capture this waste.

It is further evidence of the need to see increased equality not just as an important goal to improve wellbeing and social justice, but as a contributor to more innovation, higher productivity and better economic performance.

---

[1] Who Becomes an Inventor in America? The Importance of Exposure to Innovation - Alex Bell,  Raj Chetty,  Xavier Jaravel,  Neviana Petkova,  John Van Reenen -The Quarterly Journal of Economics (May 2019)

[2] https://www.investopedia.com/terms/e/equityefficiencytradeoff.asp

[3] Daron Acemoglu and James Robinson - Why Nations Fail (2012)

[4] https://www.imf.org/external/np/fad/inequality/  

[5] Unbound: How Inequality Constricts Our Economy and What We Can Do About It, Heather Boushey (2019)

Blog: Susan Love, FSB Scotland

Susan Love is an EDAS Board Member
and Policy Manager for FSB Scotland

During the Covid crisis, local social media has come into its own, not least as the go-to source of information about toilet roll or flour availability! Shared with almost as much enthusiasm have been the stories about local businesses and organisations going above and beyond. Every community has seen examples of small businesses manufacturing PPE or hand sanitiser, donating equipment and refreshments to care homes and key workers, or working with local charities to provide meals for vulnerable citizens. Undoubtedly, small firms have played a remarkable role in local communities.

Perhaps the most striking change has been our increased reliance on local businesses, particularly for food and drink. While once we preferred the convenience of shopping in one place, we now seek out reliable supplies of products and responsive, home delivery services to avoid any unnecessary contact.  

Working for an organisation representing thousands of small businesses across Scotland, it’s not surprising that I’ve become a new customer of even more local businesses in recent weeks. I know I’m not alone, as business organisations and local authorities alike are promoting lists of local firms who’ve nimbly changed their business model to begin, or expand, online and home delivery services. Butchers, greengrocers, bakeries, breweries, coffee roasters, grocers - too many to list - have provided a lifeline for so many who can’t shop in the usual way.

For years FSB has highlighted the importance of having resilient, diverse local economies and perhaps now we can be confident about the value of reliable, shorter supply chains. As priorities shift in local economic development - as they certainly will - not least in supporting new business and employment opportunities, a much stronger focus is required on working with the small businesses providing core services and products in our communities. We have undervalued their contribution for too long.