This lecture is about economic insecurity. About its extent, its nature and what that might tell us about ourselves and our society.
“The sense of insecurity is an existential verity for the poor of affluent welfare states.”
These are the words of the late Kjel Underlid. He was a Norwegian psychologist who studied the economic experiences of ordinary people. He was writing before the global financial crisis. Things are surely worse today for the poor of our country.
The casualisation of work and the reform of welfare are among the factors that made economic life more precarious for millions of people. Since 2010 deep welfare cuts and the general fraying of the public realm have increased the extent and severity of insecurity. We used most to associate being on the edge with unemployment, but now more than half of the six million people in the UK below the poverty line live in working households.
The idea that most people in poverty would be in work seemed shocking only a short time ago but we seem now to have accepted it. Economic worry is the new normal for millions of people in this country.
- A Populus survey just published by the RSA finds that only 43% of people are confident they will be able to maintain a decent quality of life in ten years, while the proportion not confident is only fractionally lower at 40%.
- A survey we undertook earlier this year found that over a third of workers said they would struggle to pay an unexpected bill of £100.
- Nearly four out five people think employees face more anxiety about their work than a generation ago.
- One in seven people have no savings and one in three have less than £1,500.
All this at a time when economists suggest a global downturn is overdue and when we are one way or another about to take big risks as a country.
Given its strong association with disadvantage, analysts have tended to see economic insecurity as a symptom of other more often discussed forms of disadvantage — like poverty or inequality. But I want to suggest it is different to those measures and in some ways a richer source of insight.
First, and most obviously, economic insecurity is not just a social fact - it is a human feeling.
Research by the Joseph Rowntree Foundation and others have shown many people in poverty don’t recognise themselves as such. We know that society is unjust, but inequality feels more like a social phenomenon than a personal experience.
By contrast, insecurity we recognise. The RSA defines it as:
“The degree of confidence that a person can have in maintaining a decent quality of life, now and in the future, given their economic and financial circumstances.”
More viscerally, it is the unpleasant and often distressing anxiety that we either cannot make ends meet or that we are one setback — loss of work, an unexpected bill, a bout of ill health — from disaster.
Insecurity contributes to what some psychologists call ‘a scarcity mindset’, limiting people’s horizons and imaginations forcing them to focus on the here and now rather than longer term possibilities.
Second, insecurity is more complex and personal than categories that define people by a single economic measure such as income.
It can be measured both in terms of objective status and subjective feeling and the two aspects do not always go together.
RSA research with Nottingham Civic Exchange found that insecurity is about households as much as individuals, about assets as well as income, about past experiences and perceptions of the future, not just current status.
The insecurity of a student with rising debts is different to that of an older person worried about the costs of care or a middle-aged worker whose skills are becoming outdated. Money is not the only resource that addresses insecurity. Social networks, for example, can be an important variable.
Interviewing people for a set of Radio 4 programmes about problem debt in Barking and Dagenham, I often heard how important it was to have friends who could offer timely advice or support.
Third, although it is, of course, most common and acute at the lower end of the income distribution, the experience of economic insecurity stretches much higher and more evenly than other measures of hardship.
Not only do many more people say they suffer insecurity than poverty, but our survey found that over a third of people in the top two social class categories are not confident of their financial future.
Across most of the distribution income is broadly correlated with wellbeing, but a recent American research study looking at the relationship between personal finances and people’s sense of meaning in life, found the income effect disappeared if people did not feel economically secure.
Even if we are not insecure now, most people have known how it feels. It was my parents’ life when I was a young child and my own experience as a young adult. Unlike other categories which tend to divide us into haves and have nots, us and them, the feeling of economic insecurity is widely shared. It is something that can help us empathise with others and perhaps provide a wider basis for mobilisation.
Explanations for the rise of economic insecurity often emphasise the importance of structural changes in the economy. There is no question that factors like the intensification of global competition, the growth of platform-based employment or the disruptive potential of AI and robotics have contributed. Having said which, the relationship between economic change and our experience of it is complex.
All things being equal some aspects of today’s economy should increase security; for example, full employment, the availability of more flexible forms of work and low interest rates.
But the squeeze on living standards also means more families whose economic stability is dependent on more than one wage earner. Flexible work generally offers limited scope for progression. Low interest rates make debt more manageable, but it also makes it borrowing more tempting while reducing incentives to save.
Policy choices also have had an important role in increasing insecurity. This may be actively by, for example, tightening eligibility and strengthening conditionality in the benefit system or by omission, for example, by resisting new protections and entitlements for the expanding number of precarious workers.
Underlying some of these choices is a set of problematic assumptions about who we are as human beings and what motivates us.
As well as legitimating policies which have increased insecurity, these assumptions have had deeper and wider impact on our shared culture and our personal imaginations.
This set of beliefs and practices is sometimes grouped under the heading of neoliberalism. It is an ideology which has helped to create a society in which economic insecurity is not only endemic, it is normalised, indeed promoted.
There are various accounts of the core assumptions comprising neoliberal ideology. Its ideas have in practice combined with other traditions — for example a disdain for the poor which can be traced to Victorian times. All dominant ideas are moulded around society’s vested interests and neoliberal thought is no different. Its advocates have, for example, found a way to reconcile a belief in free markets with defending monopolistic practices by large corporations.
Nevertheless, certain elements feature consistently:
- Human beings can usefully be understood as rational economic maximisers.
- The distribution of rewards in a market society is a reflection of differences in individual talent and effort.
- The virtue we prize above all others is freedom which is defined largely as a lack of external constraint.
- Aggregately, individual choices lead to social progress.
Even at the height of their influence, these ideas have been politically controversial both in themselves and in terms of their social consequences. More recently their limits have been exposed by events like the global financial crisis and by new ideas.
In particular, the rise of behavioural economics with its more evidence-based account of human cognition and motivation. For example, Nobel prize-wining economists Abhijit Banerjee and Esther Duflo have written recently about how people are much less responsive to economic incentives than policy makers tend to assume.
Yet the behavioural and societal assumptions of neoliberalism — particularly the idea that humans are and should be motivated primarily by material acquisitiveness, and its converse, economic fear — continue to be pervasive.
The consequence is the acceptance as common sense of a set ideas which are questionable, and even if true only partially so. For example:
- Pay is the strongest motivation for people at work, and an accurate indicator of their true worth.
- Competitiveness is a reliable and benign motivator of human and institutional striving.
- Unless compelled otherwise poor people will be tempted to be welfare free-riders.
- Financial debt is healthy because it enables consumption, risk-taking and striving.
- Education is of value primarily for instrumental reasons and should be judged as such.
Even with aspects of neoliberal ideology in retreat these ideas remain imprinted on policy and practice in private, public and even third sector activity.
Understanding the influence of neoliberalism may also help explain a paradox attracting increasing interest from social analysts.
In recent times the question of how people in a country like ours feel about their own lives and about their relation to society has come to feel more urgent and perplexing.
This in part reflects the various ways we have tried to explain what the OECD has referred to as the ‘three Ps’ of polarisation, populism and pessimism. The focus has tended to be on the first two of these phenomena but the third is just as important.
A recent Ipsos MORI poll found that a higher proportion of UK citizens than ever before think the country is going in the wrong direction.
As we all know, levels of trust in leaders, particularly national political leaders is very low. Recent research shows that extreme anti-establishment feeling is now much more widespread than we had thought and is now stronger on the political right than the left.
Research recently published by the Centre for Economic Performance at the LSE suggests that the experience of insecurity leads people to become more right-wing in their beliefs.
Yet, there is a contrast between our view of the world around us and the people who govern it and the answers we give when we are asked about our own wellbeing. For some years the ONS has been publishing data on whether people feel happy about their lives. This survey finds levels in the UK are reasonably high and, if anything, rising. How can this contrast be explained?
Psychologists talk about the phenomenon of ‘optimism bias’ whereby humans, and even apparently some animals, have an innate tendency to overstate their own abilities and prospects. So perhaps it is inevitable that we will be more sanguine about our own lives (over which we feel we exercise control) than the complex and distant processes governing social progress. But I want to suggest that neoliberal ideology takes this natural bias and turns it into a pathology.
Being encouraged to believe that we alone are responsible for our own circumstances and fate whist at the same time living in a society where power feels distant and centralised creates a psychologically painful gulf; between our sense that we can and should be in control of our own lives and the reality of our limited agency. We feel we must be upbeat about our own prospects, for to be otherwise would be an admission of personal failure. Meanwhile political rhetoric and conventional and social media encourage us to feel rage and despair about the world.
In his book Nervous States social theorist William Davies speaks of:
“an ideology in which the social world is fixed set of institutions, no matter how unjust, but the psychic emotional world is sufficiently malleable to compensate…producing a curious form of optimism that is all about learning to think, feel and behave differently.”
Economic insecurity is about the opportunities denied to us, but it is also about the choices we make.
The mountain of unsecured personal debt that UK households hold — according to the TUC over £15,000 per household on average — reflects need and necessity but also the encouragement we are given to show success and confidence through consumption. Even if you aren’t rich you can at least have a go at looking rich.
So, the level of economic insecurity and the pain associated with it reflects structural changes in the world and policy choice based on a particular set of ideas about human nature and social progress.
But, as people try to cope or to bring themselves comfort in an intractable world, economic anxiety and political anger are also symptoms of the way we have inscribed those ideas on our institutions and our public imagination.
I am delivering this lecture because the RSA is developing a major programme of work around economic insecurity. But the RSA only engages in an area because we believe we have chance to make a difference. What might be the elements of a programme to reduce the level economic insecurity and the pain associated with it?
First, being clearer about the nature and extent of the problem.
Whilst recognising that economic insecurity is important and that levels in the UK are high by international standards, the OECD admits that it has no commonly agreed definitions or metrics. The RSA wants to explore both quantitative and qualitative ways of shedding light on this phenomenon.
Second, exploring policies which directly address the problem.
These might include welfare reform including developing models of universal basic income. The RSA has led the debate about practical forms of UBI and has worked with communities in Scotland to explore how a basic income could enable people to change their lives. It might involve identifying ways of supporting vulnerable workers through both regulation and innovation.
I am pressing government to continue to implement the rest of the proposals made in my Good Work report. The RSA has supported a cohort of social business trying in various ways to tackle precariousness and its consequences.
Another need is forms of housing which are both flexible but offer greater affordability and security, something we have been working on with partners in the North West.
It is, by the way, worth noting that reducing insecurity may increase economic dynamism. Data shows that across the labour market the best way to increase wages is to change jobs. Bank of England Chief Economist Andy Haldane has argued that insecurity and housing costs lie respectively behind people’s resistance to changing jobs and their unwillingness to move to a new area.
Third, policies and interventions affecting the wider context in which vulnerability to economic insecurity is rife.
It might mean a stronger focus on life skills and resilience in school education. It almost certainly means lifelong learning and reskilling becoming an intrinsic part of all working lives It might mean devolving power and building local institutions that strengthen community mutual self-help. Because a sense of place matters to people’s sense of security and wellbeing the RSA is conducting an innovative project exploring the links between heritage and local strategies for inclusive growth.
Finally, we must seek to loosen further the grip of neoliberal mythology on our culture and imaginations, while at the same time developing and promulgating alternative ways of thinking about human behaviour and social progress.
In part this is about public discourse, challenging the continuing influence of neoliberal ideas in policy and practice, something we often do through the RSA’s events programme.
It is also, more concretely, about exploring how the more communitarian, relational and empathic ways most people conduct their lives beyond state and market can be embedded in new organisational forms.
In relation to public services this means developing forms of provision based on deeper collaboration between agencies and professionals on the one hand and communities and citizens on the other.
In relation to the economy it means new institutions and alternative models of action such as radically decentralised organisations, cooperatives or mutual banks like the ones the RSA is helping to design across England.
It is by the way important also to emphasise that a model of progress relying on material acquisitiveness and financial anxiety — aspects of what is sometimes referred to as the hedonic treadmill — is very difficult to reconcile with moving towards a sustainable economy able to respond to the climate emergency.
It may seem overly ambitious to develop a programme that stretches from supporting local innovation to seeking to recast some of society’s dominant narratives. But this is how the RSA rolls.
It is why we describe our model of change as ‘Think Like a System, Act Like an Entrepreneur’. We are confident that big change is possible but believe that the routes to change are unpredictable and must be pursued with an experimental, adaptive approach.
I want to conclude with one way the RSA thinks about existing systems and how these systems might be reconstructed and realigned.
This starts from the interaction of three core drives behind human motivation and social action; the drive of authority, the drive of individual aspirations and the drive of collective norms and belonging.
Roughly speaking, these systems map on to state, market and civic society. The UCLA-based French sociologist Loïc Wacquant has said that neoliberalism represents an “articulation of state, market and citizenship that harnesses the first to impose the stamp of the second onto the third”.
To achieve a step change in human welfare and wellbeing including a diminution of economic insecurity involves resetting and realigning these systems of authority, belonging and aspiration. This is the basis for a new social contact, one based not only on the responsibilities of social partners or institutions but on a wider conversation about the people we are and the people we want to be:
- Reforming and re-legitimising authority can help restore people’s faith that institutions — particularly governmental ones — can be on their side.
- Strengthening solidarity and freeing civil society can not only increase resilience but enable people to acknowledge the importance of collective support.
- Challenging a mythical, narrow and corrosive account of human motivation and fulfilment can help us be gentler on ourselves while opening up richer ideas of growth and fulfilment.
In summary, a focus on economic insecurity offers a way to connect social injustice and dysfunction to everyday human experience. It provides the basis for more inclusive dialogue and a broader alliance.
It encourages us to think about specific policies but also the underlying values that shape our society and our imaginations. And it provides us with a way of exploring not just specific policies and innovations but the kind of new social contract we need.
A social contract that might start to close the painful gulf between people’s enervating sense of personal sovereignty and their bleakly diminished hopes of social progress.