‘We can afford what we can actually do’ — 2

Across the country people from all walks of life — from those running families to those running organisations and Governments — are having to ride two horses at once: one that says we can only do what we can afford, financially speaking; and one that says we can afford what we can actually do. This second part of a three part series examines ways to expand what we can actually do.

In the dark days when the second world war was coming to an end people started discussing how to rebuild. As soon as they did so, they found themselves embroiled in a fundamental argument. Some said there was little if anything we could do, because we didn’t have the money to do it. Others, led by John Maynard Keynes said that was nonsense. As long as we had people who could work and resources they could work with, there were plenty of things we could do. “We can afford what we can actually do”, he said.

How then can we expand what we can actually do, in our current situation? Here are some of the things we at Mydex Community Interest Company have been thinking about and trying to put into practice.

Think capabilities

In recent decades, policy-makers and decision-makers have become obsessed with targets. They believed that if they defined the outcomes they wanted to achieve and focused resolutely and exclusively on achieving these outcomes, then all would be well. It all sounded very sensible and practical, but in fact it was quite the opposite. Why? Because what really matters is not whether one particular outcome is achieved, but whether we have the ability to continue achieving this outcome. What really matters is our capabilities because results follow from capabilities.

Yes, it is possible to strain every nerve and expend every ounce of energy achieving a particular target (and then collapsing in a heap afterwards). But doing this doesn’t build capabilities. It destroys them. And that’s what’s been happening with decades’ worth of outcomes-obsessed target setting, outsourcing and so on, with institutions like the NHS effectively being run into the ground.

Once we think of outcomes as the results of capabilities, then the main goal of every activity shouldn’t be just to deliver this or that particular outcome. It should be to do everything we can to build underlying capabilities alongside delivering the outcome in question.

Results are ephemeral. Once you’ve achieved them, they’re gone. But skills, knowledge, know-how and infrastructure are not ephemeral. They last. It’s capabilities that make results permanent — and that make it possible to improve on these results as time goes by.

Think genuine productivity

It’s all very well saying “we can afford what we can actually do” but what happens if what we can actually do is constrained — if our resources are limited?

This has been the human dilemma since the year dot. This is why expanding the scope, range and volume of the things we can actually do has also been the focus of human economic activity since the year dot.

At the heart of this lies productivity. Now, it’s sad but true: in recent times the word ‘productivity’ has got itself a bad name. It’s become associated with negative things like cutting corners or sweating the labour force — or, perhaps, with simply being boring and tedious. But in reality productivity is all we’ve got, because productivity is about making enough of the things we physically need practically available. Productivity is about building the ability to generate more, better outcomes using less resources — and what is more important than that? Without increased productivity it’s not possible to sustainably improve peoples’ material wellbeing.

Genuine productivity is liberating. When, for example, some clever sailors decided to start putting up sheets of fabric to capture the power of the wind rather than relying on rows of tired, sweating men desperately pulling on oars, they achieved a huge productivity revolution. Men who had previously worked desperately hard pulling oars could now devote their time and energy to doing other things. Boats could carry much bigger cargos (using the space previously occupied by oarsmen). And sailors could take these cargoes much further, because the wind never tires.

Sometimes productivity revolutions are generated by technical breakthroughs (LED lighting uses 85% less energy than previous forms of lighting). At other times, they are generated by changing the ways in which work is organised. Henry Ford’s moving assembly lines cut the time and labour needed to make a motor car by over 90%, making cars available to ordinary people.

Whether it’s from technical or organisational innovation, genuine productivity enables humans to achieve more using less resources: less time, less energy and effort, less materials. It is how real wealth has been created since the year dot.

But if Governments focus only on what they can afford — on the money overlay — while ignoring the underlying economic realities of what can actually be done, then the chances we have to improve productivity will be be passed over. Ignored.

This has now been happening for decades, and it really is time that it changed.

Think mutual self help

In countless situations humans can achieve far more if they cooperate and work together instead of simply acting alone. It’s much easier for two people to push a broken down car than one. Even easier if it’s three.

Back in the day, before this country had a welfare state and before Governments and states grew so big and powerful, people had all sorts of needs that weren’t being met. Governments of the day would not, or could not, do anything to help them, so they had to learn how to help themselves.

That’s what the labour movement did, for example. It gathered people together to share resources and to use these resources to help each other help themselves. People did this in many different ways, building friendly societies, mutual building societies, burial societies, producer cooperatives, consumer cooperatives, trade unions, and so on — all of them acting not on the mantra of ‘we can only do what we can afford’ but focusing on the question ‘what we can actually do?’.

Decades ago, in the face of institutional inertia and failure, the people of this country created a flowering of institutional creativity, building completely new institutions from the ground up, designed to fit the circumstances they found themselves in. The welfare state — social security benefits, state pensions, the NHS and so on — were just further examples of a long and deep history of mutual institutional innovation.

With Governments once again saying there are things that they cannot or will not do, perhaps it is time to cherish and revisit that legacy. Perhaps, we as a society and citizenry need to stop looking up to the top with a begging bowl and start looking to each other again, to ask a different question: “OK. So what can we as communities (in, that is, countless different types of community) actually do with the resources we have got?”

Think ‘clubs’ and communities, not just ‘markets’ and ‘states’

In recent years, many people have pointed out that the classic left/right debates about ‘markets’ versus ‘states’ renders a huge part of our lives invisible — the fact that we live in communities. They may be local, physical communities or communities of interest or communities of practice. Either way, they’re important because they bring people together in ways where they share a common experience or interest.

In the context of expanding what we can actually do, communities are important because there are many ways to cooperate and share resources, things, information etc within a community. There are ways to make things possible and enrich peoples’ lives without having to turn to either a market or a state.

But there is lots more where that came from. Back in the mid-sixties a young economist called James Buchanan wrote an article called ‘An Economic Theory of Clubs’. In it, he noticed that when we look at real world economic activities, very few of them fit the mould of either pure market (all just private individuals exchanging purely private property), or pure state (where everything is publicly owned and all decisions are made by the state).

In reality, he noted, most economic activities fit somewhere in the middle, in what he called clubs. This is where a number of people (but not everybody) contributes to creating a resource and enabling access to it and where, having contributed to this resource they share access to it according to rules that they have all agreed to. In a tennis club for example, every member contributes to maintaining the facilities, and every member gets to enjoy them.

To work well, clubs need boundaries. The tennis club can easily share a court between 100 or perhaps 1000 members. But if it becomes 100,000, then the court can’t serve them all. Likewise, five or six people helping to push that car is great. But if it is 50 or 60 it doesn’t work any more. So clubs happen when specific groups of people get together to do specific things.

Using Buchanan’s terms, firms a sort of club. So are supply chains and clusters where a number of organisations work together to achieve a common purpose — for example in health and care, dealing with one individual’s specific issue where lots of different inputs are required.

Once you think about it this way, it quickly becomes obvious that the vast majority of economic activity isn’t actually undertaken by either markets or states, but by ‘clubs’ where specific groups of people find ways of working together on particular things to improve on and expand what they can actually do.

This underlines the importance of human agency. Very often we find ourselves at the mercy of market forces, or dependent on the state. Markets and states are supposed to be complete opposites, but they have one thing in common. They both undermine and restrict human agency. (A key point about market forces is that they force us to behave in particular ways.) In contrast, clubs and communities emphasise and develop agency — our joint quest to lift the constraints we are faced with.

In short, there is a vast swathe of positive, productive economic activity that could be undertaken — that could expand what we can actually do — that needs neither remorseless market forces nor centralised bureaucracies to enable it to work. There is a vast untapped potential just waiting to be tapped.

Think institutional innovation

As Keynes pointed out, money isn’t a real economic resource. You can’t eat pound notes or build houses with them. To eat something we need food — a material thing, not a financial, symbolic thing. To have food we need to grow it. Growing food takes time, from planting to harvesting. Growing, processing and moving food requires energy and material resources like land, tractors and trucks. That is what the real economy is about: People, Time, Energy, Resources.

Money is just a poor symbol of these things. It’s supposed to represent real economic resources (though, increasingly it doesn’t), and it’s used as a mechanism to allocate and deploy these resources. But it is not the real thing. It is an institutional overlay, sitting on top of the real economy, creating a veil between us and the real thing (a veil which often obscures the real thing’s workings).

Institutions create the ‘rules of the road’ by which we humans get together and do things. We need these institutions. But sometimes they go wrong. Sometimes they are not well designed.

Money is one such institution. The institutional overlay of money and financial affordability works well when it deploys and allocates available human and material resources to meet human needs. But if and when it stops doing this job — if it creates a barrier between meeting human needs and the deployment of resources — then this institutional overlay is no longer fit for purpose. It has become a constraint that we need to lift.

The answer to not having enough money to spend on what we need is not to simply spend money as if there is no tomorrow. It’s not a choice between ‘fiscal responsibility’ and ‘fiscal irresponsibility’. It is to shift focus: to focus on expanding what we can actually do. To find new ways to connect real-world resources with real-world humans and their needs.

This isn’t just about technical innovation. It is about institutional innovation: building new institutions that create new rules of the road to enable people to get together. To make these connections in new ways to do new things. Just as the labour movement did a century ago.

Think genuine investment

In theory, the purpose of an investment is to build a capability that delivers better results. This is where the ‘returns’ on your investment come from. But over the past few decades, ‘investors’ have grown impatient with the time and effort that’s needed to build capabilities.

Instead, they have looked for ways to get better results wihtout having to worry about that pesky intervening bit of earning them via the extra wealth generated by the development of new capabilities. For example, if you can earn a bigger ‘return’ by shuffling the title deeds to an already-existing asset or gambling on its future price, why not? A return is a return. Who cares about how it’s actually created?

That’s why today, banks and the City of London hardly invest anything in real productive capacity. Virtually all of the money they ‘invest’ goes into the prices of existing assets such as houses, stocks and shares, or in gambling on the future prices of these in secondary ‘derivative markets’. For them, ‘investment’ is all about eating the cherries while doing nothing to plant the cherry trees or tending the cherry orchard.

The early 20th century economist Thorsen Veblen had a term for this. He called it sabotage. This was the process by which the people holding the money — the people deciding what is ‘affordable’ — go on strike if doesn’t guarantee them the quickest and highest possible return. Where they refuse to invest in things that may be immensely productive simply because it doesn’t line their pockets quickly enough.

In such a world it may be helpful to use the words ‘sabotage’ and ‘saboteur’ every time you come across the words ‘investment’ or ‘investor’. So, for example, if you see the term ‘social investor’, read ‘social saboteur’. With a few admirable exceptions it’s usually a good way of getting closer to the truth . But this is a truth that needs to change, with the return of real investors with a focus on expanding what we can actually do.

Think de-monetisation

For many decades now, most policy initiatives have focused on marketisation: where there is a human need it should have a price placed on it and for money to be exchanged. But if we enter a world where there is less money to spend, less money is exchanged, so fewer needs can be met.

It’s time to move in the opposite direction: to loosen this stranglehold by finding ways to de-monetise exchanges of value. If we focus on what we can actually do, rather than what we can ‘afford’ in narrow money terms, we find ourselves looking at real-world things like available time, energy (including human energy) and resources (both material and intangible e.g. knowledge, know-how, information and trust). To connect them, we might consider using local ‘alternative’ currencies or tokens.

Such de-monetisation also opens the door to other forms of non-market exchange. Not everything has to be sold for a price. Things can also be shared, given, borrowed and lent. Deepening and extending what we can actually do includes deepening and extending what we exchange, and how.

Think Fair Process

A Fair Process is, if you like, a process for making and implementing decisions that treat those involved and affected with respect: giving them a voice, being impartial when assessing what they have to say, making decisions in their interests (rather than listening to some more than others, and biassing decisions in favour of particular vested interests). It’s a human rights approach to whatever you are trying to do.

That may sound obvious. But very often it’s not what happens. For example, ‘leaving the market to decide’ is an unfair process almost by definition. This is because markets are organised around the spending of money and that means those with the most money have the most say, while those without any money end up being ignored.

Fair processes, on the other hand, tend to produce the best decisions (precisely because all voices have been heard rather than just a select few). They also earn buy-in from those involved (precisely because the process is seen to be fair). This is crucial if and when to actually get something done we have to create a ‘we’: we have to bring people together in a way that encourages them to work together.

Conclusion

We now live in a world where what we can do is increasingly restricted by the institutional constraints of “what we can only do what we can afford”. Day to day, all of us at every level — from families to those working in Governments — have to find a way of surviving within these constraints. But as they get tighter we also have to look for wriggle room. We have to open up spaces which enable us to expand what we can actually do. This blog has suggested some ways we can do this (‘we’ being important here, because very often it needs a joint effort).

As a Community Interest Company, we at Mydex know all about the constraints of only doing what we can afford. We never have enough cash to do all the things we want to do. On the other hand, our whole raison d’etre is to expand what we as a society and individuals can do with data. So our next blog looks at how Mydex fits what we’ve been talking about here.