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Home Opinion Progressive economic governance in high-risk, high-opportunity societies
Economy • Europe • Jobs

Progressive economic governance in high-risk, high-opportunity societies

Florian Ranft - 26 November 2015

How can the centre-left build a new inclusive growth model that combines innovation and social justice?

Progressive politics finds itself in an incredibly testing era: a post global financial crisis era. The pressures on mainstream parties are far greater than at any time in the recent past. Europe has suffered an unprecedented loss of economic activity, big increases in public debt and a crisis in the currency union. Productivity growth has stalled and living standards are declining, in some cases very steeply. Welfare systems are facing escalating pressures, both in terms of their capacity to tackle the new social risks of the 21st century and in relation to demographic and fiscal sustainability. On top of that political instability and armed conflict in Europe’s backyards are creating unknown pressures on the solidarity within the EU and with strategic global partners. This scenario is not an easy starting point for drawing out an agenda for a progressive economy in Europe. However it is the centre-left’s task to build a common approach for a new inclusive growth model that can combine innovation together with greater social justice.

So far the prevailing response to the global financial and economic crisis has been a mixture of economic orthodoxy and austerity. As a result of these policies governments have paid insufficient attention to the social consequences of the financial crisis. This has in the main been driven by the centre-right. No one could claim that the centre-left has got the better of the argument since 2007-8. Across the continent centre-left parties struggle to convince voters and create a dynamic around their electoral campaigns. In many cases, the causes for this electoral downturn are homemade. They include a lack of vision for Europe’s future economic and social direction and inadequate explanation being offered for past policy failures.

In the context of a mobile innovation economy shaped by new technologies, progressives have to find ways to deliver more inclusive economic growth and productivity enhancements. They would allow higher living standards, better paying jobs and generous welfare states to be a reality in a globally competitive world. This requires embracing and shaping the seismic impact of technology and the future of work and welfare. Forward-looking policies must centre on making these changes beneficial for the population as a whole: an open society focusing on equal opportunity, inclusive growth and social investment in contrast to political opponents who advocate a closed society and economy.

There is a need for a unifying, compelling and future-facing story. A successful progressive narrative would put economic and social modernisation and a positive vision of the new economy in the centre of reform.

The coming decades can be characterised as a ‘high-opportunity, high-risk society’, in which returns to entrepreneurship and skills will increase vastly and whole swathes of new jobs and industries will be created. The economic evidence shows that waves of innovation and Schumpeterian ‘creative destruction’ – the development and adoption of new products, services, processes and business models – are vital to support rising living standards and improving productivity. But without concerted policy efforts this could occur alongside higher risks of low-paid or insecure employment, or having skills which quickly become surplus to requirements. In this sense the digital revolution provides an opportunity because it demands progressive solutions.

But making the political case for the progressive power of innovation, and the digital economy, can be challenging. Disruption threatens incumbent firms, jobs, and the way people work and live, creating strong incentives to oppose change. The task is to embrace economic policies and advocate a politics that protects consumers and challenges rent-seekers who preside over protected and unproductive sectors. This means introducing reforms that are pro-market, pro-competition, pro-consumer and pro-innovation but have a redistributive dynamic and break old-fashioned structures that mainly serve traditional elites.

Alongside the actions of national governments, policies on innovation economics, jobs and investment have to be supported at EU level. The centre-left should lead an EU agenda aiming to complete the single market and leverage investment and financing. These are crucial measures that can boost the growth of innovative firms and facilitate job creation. The Juncker Investment Plan is a centre-left victory and it should be built upon.

At the European level, the centre-left has to unite more to champion a positive vision of a European jobs renaissance. The number of job opportunities offered by the single digital market is huge. But the same can be said for the environmental and energy sector if the centre-left fully stands up for sustainable growth, digital infrastructures, education, and research and development. The centre-left should publicly debate these issues and develop a political agenda for growth, jobs and innovation that stands in contrast with the cruder market-orientated approach of the centre-right.

Progressives must also work in concert at EU-level to complete the single market and set common regulatory standards. They need to build and expand on the EU Investment Plan and Capital Markets Union initiatives in order to boost innovative and high growth firms. As the report Reforms, Investment and Growth by Henrik Enderlein and Jean Pisani-Ferry shows there is neither a quick fix nor a one-size-fits-all strategy. Prioritisation and sequencing is necessary.

Any progressive economic agenda in Europe requires reforms at national level as well as a strong focus on improving the EU’s regulatory framework. An appropriate balance between national responsibility and collective problem-solving is key to facing up the challenges of globalisation and Europe’s economic future.

Florian Ranft is a researcher at Policy Network

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The Policy Network Observatory promotes critical debate and reflection on progressive politics. It is centre-left orientated but determinedly challenges social democracy. It is pro-European but restlessly questions EU institutions and practices.

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