The 2008 financial crisis taught us a crucial lesson: monitoring individual banks for risks was insufficient. It was a systemic issue, and the response was a shift towards macroprudential regulation, recognizing the need for intervention at the structural level. However, this lesson seems to have been forgotten when it comes to governing the supply side of the British economy, leading to the compounding crises we face today.
The British state continues to operate with a pre-2008 mindset, monitoring sectors and disciplining firms individually. This approach fails to address the root causes of instability and excessive costs. High energy prices, deteriorating services, housing supply issues, and care degradation are all symptoms of a broken system.
What we are witnessing is not just a policy failure but a fundamental flaw in our economic architecture. The privatization of essential services has created a state that pays for failure without the power to fix it. This has resulted in a hybrid state-market system characterized by price distortions, excess profits, and chronic underinvestment.
To fix this, we need to regain democratic control of the supply side. This is where Manchesterism comes into play. Andy Burnham's Greater Manchester program has demonstrated a different approach, delivering affordability and economic dynamism by regaining public control of essentials. Manchesterism offers a theory and a political project that can transform our economy and society.
The current situation is a result of the privatization of essential services, which has led to a focus on profitability rather than social needs. This has created a pathology where extraction takes precedence over investment, fragmentation over coordination, and profit over provision. The result is a crisis of living costs, productive capacity, and public finances.
Almost two-thirds of the public believe the cost-of-living crisis is here to stay, and they are right. For many households, basic necessities have become unaffordable, and this insecurity has become a permanent state. Our high costs for essentials squeeze not only household budgets but also put pressure on public spending, creating a never-ending cycle of transfers and support.
The existing policy toolkit, including income transfers, regulation, and planning reform, fails to address the core issue. These measures are like treating symptoms without curing the disease. Income transfers redistribute resources upward, and regulation faces a dilemma between attracting private capital and effective discipline. Planning reform clears the way, but it doesn't address the question of who will build and at what cost.
What we need is a third pillar of political economy: the Productive State. This approach goes beyond private market provision and welfare state redistribution. The Productive State intervenes on the supply side, investing public money into public assets for public provision. It returns sovereign control to the state, allowing it to produce and provide the essentials required for a dignified life.
The Productive State identifies systemically important sectors and applies different ownership models. It intervenes in production, not just distribution, and offers structural advantages over private alternatives. Public corporations, as independent and commercially mandated entities, can provide patient capital, lower the cost of capital, and coordinate systems more effectively.
The criteria for intervention are clear: when private ownership fails to deliver dynamic gains, when prices are systemically significant, when there is an investment strike, when social need is not met, and when public policy goals require intervention. These tests highlight the failures of private ownership in essential sectors.
Manchesterism is not just a theory; it is a practical demonstration of the Productive State in action. The Bee Network in Greater Manchester has shown that public control of essentials can reduce costs and improve services. This approach can be replicated and scaled up for energy, water, housing, and care.
Objections to this agenda, whether fiscal, institutional, or political-economic, can be addressed. The Productive State, when properly designed and sequenced, can be financially sustainable and market-friendly. The British state has the capacity to deliver this program, and the necessary coalition can be built by engaging workers, communities, and households who have borne the privatization premium.
The choice before us is clear. We can continue down the path of external expansion and geopolitical tension, or we can accept stagnation and manage decline. Or, we can choose the path of the Productive State, following in the footsteps of Manchesterism. This path offers stability, abundance, and security. It creates a political community based on dignity and equality, where shared institutional foundations transcend identity and interest fragmentation.
The Productive State delivers macroeconomic stabilization, abundance through coordination, and security through decommodification. It establishes a stable economic system with three tiers: a decommodified foundation of essentials, a stabilized market middle, and an innovation frontier. This system weakens the empire of necessity and expands the realm of freedom.
The choice is ours. We can let crises force change or design a deliberate path towards a better future. Manchesterism has shown us the way, and it is now up to us to act with political courage and build a movement for transformation.
