Revisiting the blue economy – a vital part of the world’s environment

This is the third in a series of republished blog posts from The Knowledge Exchange, revisiting important topics with ongoing relevance for public policy and practice, as well as for communities and wider society. This post covers the blue economy, focusing on why it is so important, the current challenges and what is being done to protect it. At the end of the republished article, we’ve updated the post to report on recent developments.

As the international community attempts to address the current ‘climate emergency’, increasing attention has been paid to the green economy. According to the United Nations (UN), “an inclusive green economy is one that improves human well-being and builds social equity while reducing environmental risks and scarcities.” Over the past decade, many governments have highlighted the green economy as a strategic priority, and since the Intergovernmental Panel on Climate Change (IPCC) published its special report on the impacts of global warming of 1.5 °C, action has been stepped up across the globe.

However, green economy strategies tend to focus on the sectors of energy, transport, agriculture and forestry, which leaves out a vital part of the world’s environment – the oceans. It has been argued that “a worldwide transition to a low-carbon, resource-efficient green economy will not be possible unless the seas and oceans are a key part of these urgently needed transformations”.

Perhaps unsurprisingly then, a new buzzword in the international sustainability agenda is gaining momentum – the ‘blue economy’. Since the turn of the 21st century, there has been an increasing commitment to growing the blue economy but what exactly is it and why is it important?

What is the blue economy?

Similarly to the green economy, there is no internationally agreed definition of the blue economy. Its origins stem from the Rio+20 outcomes whereby member states of the UN pledged to ‘protect, and restore, the health, productivity and resilience of oceans and marine ecosystems, to maintain their biodiversity, enabling their conservation and sustainable use for present and future generations.’

It is further explained through the UN General Assembly support for Sustainable Development Goal (SDG) 14: ‘Conserve and sustainably use the oceans, seas and marine resources for sustainable development’ as set out in the UN’s 2030 agenda for sustainable development.

Various definitions have been used by different agencies.

According to the World Bank, the blue economy is the “sustainable use of ocean resources for economic growth, improved livelihoods and jobs, and ocean ecosystem health.”

Conservation International has suggested that, “at its simplest, ‘blue economy’ refers to the range of economic uses of ocean and coastal resources — such as energy, shipping, fisheries, aquaculture, mining, and tourism. It also includes economic benefits that may not be marketed, such as carbon storage, coastal protection, cultural values and biodiversity.”

Like the green economy, the blue economy model aims for improvement of human wellbeing and social equity, while significantly reducing environmental risks and ecological scarcities.

Why is the blue economy so important?

Clearly, ocean health is vital to the blue economy. With over 70% of the world’s surface covered by ocean, almost half of the world’s population living in close proximity to the sea, the majority of all large cities being located along the coast and 90% of global economic trade travelling by sea, it is not difficult to see why the ocean and its resources are seen as increasingly important for both sustainable and economic development.

It is also a source of food, jobs and water, and contributes to the protection of the environment by absorbing carbon dioxide emissions. It has been estimated that the global blue economy has an annual turnover of between US$3 and 6 trillion and is expected to double by 2030. It is also estimated that fisheries and aquaculture contribute $US100 billion annually and about 260 million jobs to the global economy. In addition, over 3 billion people around the world, mostly from developing countries, rely on the world’s oceans and seas for their livelihood.

It is therefore not surprising that ocean pollution and the threat to marine resources have ascended the sustainability agenda in recent years, attracting increasing global attention and high-profile interest.

Sir David Attenborough’s popular Blue Planet II series highlighted the devastating impact pollution is having on the world’s oceans. It led to drastic behaviour change – 88% of people who watched the programme reported having changed their behaviour as a result, with half saying they had “drastically changed” their behaviour, and half saying they had “somewhat changed” it.

The recently heightened concerns over climate change have also highlighted the importance of the blue economy. The IPCC report warned that coral reefs would decline by 70-90% with global warming of 1.5°C, whereas virtually all (> 99%) would be lost with 2ºC.

Momentum building

Governments and organisations from across the world have been taking action to address the climate emergency with many strengthening commitments to growing the blue economy in particular.

The first ever global conference on the sustainable blue economy was held in 2018. It concluded with hundreds of pledges to advance a sustainable blue economy, including 62 commitments related to: marine protection; plastics and waste management; maritime safety and security; fisheries development; financing; infrastructure; biodiversity and climate change; technical assistance and capacity building; private sector support; and partnerships.

A new High Level Panel for a Sustainable Ocean Economy was also established in September 2018, the first time serving heads of government have joined forces on a global pact to protect the world’s oceans.

The UN’s Decade for Ocean Science (2021-2030) will also soon be upon us and the World Trade Organisation (WTO) has been tasked with ending harmful fisheries subsidies by 2020. New approaches are also helping countries value their small-scale fisheries. Scotland’s economic action plan, for example, makes a specific commitment to grow the blue economy which includes a new, world-leading approach to fisheries management with a focus on inclusive economic growth.

Way forward

The increasing awareness of the blue economy and the threats it currently faces provide an opportunity to change things for the better. As the global conference on the sustainable blue economy suggested, a sustainable blue economy strategy needs to be people-centric with ocean-centric investments. If momentum keeps building towards growing the blue economy across the globe, perhaps this will go some way to mitigating the global climate emergency bringing benefits for all.

What happened next?

Since this blog was first published in 2019, the world has been turned on its head by the global pandemic. But while COVID-19 has stopped many things in their tracks, the climate crisis is not one of them. The IPCC’s latest report has provided new estimates of the chances of exceeding the 1.5°C global warming level, warning that “unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to close to 1.5°C or even 2°C will be beyond reach.”

Of course, like so many others, the pandemic has also severely impacted blue economy sectors, which now need further support. The precise impacts of the disruption on the future of the blue economy remain unclear and it has been argued that building strategies that seek to maintain its potential pre-COVID will be challenging. However, the momentum that was building across the globe in committing to growing the blue economy has not halted.

We have now reached the UN’s Decade for Ocean Science (2021-2030) which provides a common framework to ensure that ocean science can fully support countries to achieve the 2030 Agenda for Sustainable Development.

The 14 world leaders of the High Level Panel for a Sustainable Ocean Economy have committed to sustainably manage 100% of the ocean area under their national jurisdiction by 2025.

Despite delays and constraints, progress has been made by the WTO on harmful fisheries subsidies, with the 12th Ministerial Conference now to take place from 30 November to 3 December 2021.

And following the Scottish Government’s commitment to growing the blue economy, it has since committed to developing a blue economy action plan which will take a joined-up strategic approach across the diverse range of Scotland’s established and emerging marine sectors to maximise the opportunities offered by its abundantly rich marine zone. It will also “seek to help marine sectors and coastal communities to recover from the COVID-19 crisis and grow sustainably whilst also supporting a transition through EU Exit.

If anything, the pandemic has succeeded in emphasising the enormity of the climate emergency and the action required to address it. And the world’s oceans still have a vital role to play in this fight.

As we approach COP26, often billed as our ‘last chance’, it is hoped that outcomes will include “greatly enhanced commitments and resources to meet the challenges presented by the ocean-climate nexus”.


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Lift-off for the new space economy

Nearly Cloudless Scotland, As Seen From the ISS“Nearly Cloudless Scotland, As Seen From the ISS” by NASA’s Marshall Space Flight Center is licensed under CC BY-NC 2.0

It may come as a surprise to learn that Scotland is on its way to becoming a space industry superpower. The country is home to over 130 space businesses, with a combined annual income of £140m. Glasgow is building more satellites than any other city outside Houston.

Scotland’s booming space sector was the focus of a webinar that was part of last month’s Digital Leaders Week.  Leading the event was Tom Soderstrom, former Chief Technology and Innovation Officer at NASA/Jet Propulsion Lab, and current Global Lead for Chief Technologists at Amazon Web Services (AWS).

Tom explained that Scotland’s increasing involvement in the space sector is part of a wider growth in the ‘space-for-earth’ economy, which includes telecommunications and internet infrastructure, earth observation capabilities and national security satellites.

The factors driving the new space economy

Falling costs for building and launching spacecrafts have attracted greater investment in the commercial space industry. Space hardware is cheaper because it has become much smaller – these days, a miniature satellite (or ‘cubesat’) is typically about the size of a shoebox.

In recent years, the number and range of applications relying on satellite technology has rocketed. From smartphones and GPS devices to broadband access for developing nations, demand for space-based infrastructure has never been greater.

Data is another important driving force behind the new space economy. Scientists and governments need reliable data in order to understand how our planet is changing, and satellites can be used to take vital measurements of things like ice thickness coverage, deforestation, and ocean surface temperatures.

Cubesats are also used for monitoring shipping lanes, keeping a record of crop yields, and for protecting communities. Tom gave an example of an Australian company which uses satellite data for the early detection of wildfires, enabling emergency services to respond before lives and properties are put at risk.

Scotland’s place in space

Scotland is well placed to make the most of the booming space economy. According to Scottish Development International, operating costs for space companies are 40% lower in Scotland than elsewhere in the UK.

Another of the webinar participants, Professor Marion Scott from the department of mathematics at the University of Glasgow, highlighted the importance of Scotland’s skilled workforce. Nearly 20% of  all UK space roles are filled by Scotland’s 7,500 person strong talent pool. And Scottish universities have been quick to fill the gaps in different sectors by providing new courses, training and collaboration.

Meanwhile, Phil Cooper, AWS’ regional manager for Europe, the Middle East and Africa, pointed to the burgeoning reputation of companies in the Scottish space sector. AAC Clyde Space, for example, has become a market leader in providing spacecraft design, satellite operations and data delivery to governments, businesses and educational organisations.

But Scotland’s space boom is far from over. Phil forecasts that another 30 start-ups could be up and running by this time next year.

Another exciting prospect is the arrival of vertical launch capabilities. Five space hubs are currently under development around Scotland, and last year a site in Sutherland received planning permission from Highland Council to develop the UK’s first space port. By next year, it’s hoped that the vertical launch pad near Melness will send its first satellite into space.

Cosmic congestion: the problem of space junk

While there are lots of positives associated with the space economy, it’s not all good news. There are currently almost 7000 satellites orbiting the Earth, and the US National Oceanic Atmospheric Administration (NOAA) says that figure could double in 2021. As space becomes more congested, the problem of debris from old spacecraft and satellites has grown.

There’s a growing need for collaboration and internationally-agreed regulations to ensure that today’s satellites don’t become tomorrow’s space junk.

Tom Soderstrom highlighted research by Fujitsu, in collaboration with Astroscale, the University of Glasgow and AWS, to develop a proof of value to make space debris removal missions more commercially viable using its open innovation technology. The UK government has provided funds for this and other projects aiming to track space junk and monitor the risks of potentially dangerous collisions with satellites or even the International Space Station.

The space economy: tackling climate change

Environmental issues will be dominating the headlines later this year, when Glasgow plays host to the critical United Nations Climate Change Conference (COP26). One of the questions raised at last month’s webinar was how Scotland’s space sector can address the Earth’s climate challenges.

Marion Scott explained that there is now a network of universities and research centres working together to consider some of the climate challenges in advance of the COP26 meeting. At the same time, Marion stressed the importance of earth observation data in helping assess the scale of the problem of climate change.

Phil Cooper agreed that data was vital, and highlighted a competition launched by the Satellite Applications Catapult and the Commonwealth Secretariat in April which aims to stimulate discussion around the development of new concepts relating to ocean sustainability, incorporating satellite data and technologies.

The only way is up: the future of the space economy

In 2019, the World Economic Forum reported that while heavyweights like the United States, China and Russia have the greatest number of satellites in orbit, more and more nations – including the UK, Canada, Germany, Argentina and Luxembourg – have been developing their own space programmes. The Economist recently highlighted the growing number of African countries joining the commercial space race – last month the tiny Indian Ocean island of Mauritius became the latest country to launch its first satellite.

At the conclusion of the webinar, Phil Cooper expressed great optimism about the future of the space-to-earth sector, which can involve not only scientists, but people working in manufacturing, digital, marketing and many other industries. And, as Tom Soderstrom observed, the opportunities being generated by the new space economy are almost unlimited:

“The space bubble will grow faster than even I can imagine!”


Further reading: more articles on innovation from The Knowledge Exchange blog

Glasgow Green photo essay: a park for all seasons

For generations, urban public parks have been places for communities to meet, to connect with nature and to enjoy recreational activities. Parks have multiple benefits for biodiversity, human health and the environment. They can help with flood prevention and during the summer can help control temperatures and humidity.

One of the oldest public parks in the UK is Glasgow Green, a short walk from the centre of Scotland’s biggest city. In 1450, the Bishop of Glasgow gifted the common lands of Glasgow Green to the people, and for centuries it was the city’s only green public space. The park has witnessed some important moments in the city’s history, including demonstrations, sporting and cultural events.

During the early years of the industrial revolution, the park became an oasis for residents from unhealthy housing and working conditions. Similarly, in our own times, Glasgow Green has been an important refuge during the restrictions imposed as a result of the coronavirus pandemic.

Today, Glasgow Green remains open 24 hours a day, with its 136 acres of lawns, flowerbeds, fountains and architectural monuments maintained by workers from Glasgow City Council’s Parks Department. This photo essay reflects on some of the sights and stories associated with Glasgow’s oldest public park.

Flora, fauna and the Glasgow Green geese

Glasgow Green is home to a variety of plants, flowers and trees, as well as a wide range of wildlife species, including birds, butterflies and red foxes. One of the more unexpected sights in the park is a flock of geese.

For more than 50 years, geese were deployed to guard the stocks of Ballantines whisky maturing in Dunbartonshire warehouses. Geese are famously territorial, and act as a vocal alarm against intruders. With the advent of CCTV in the 1990s, the “Ballantines Bodyguards” were retired to Glasgow Green, and placed in the care of the Glasgow Humane Society. Coincidentally, their new home looks onto a grain distillery, perhaps serving as a reminder of their past life.

A gathering place for sport and culture

In all weathers, Glasgow Green attracts walkers, cyclists and joggers, as well as offering open spaces for team sports. Rowers from both Glasgow and Strathclyde University boat clubs train on the River Clyde beside Glasgow Green.  The park also has strong historical sporting connections. Golf was played here as early as the 16th century, and Glasgow’s two famous football teams – Celtic and Rangers – were both established on Glasgow Green. In 2014, the Glasgow Green Hockey Centre was opened in time to host matches for the Commonwealth Games.

Glasgow Green has also played host to some of the biggest names in music, from Radiohead and Iggy Pop to Coldplay and Lewis Capaldi. In 1990, the park hosted a summer concert celebrating Glasgow’s year as European City of Culture, headlined by local heroes Deacon Blue. In the summer months, Glasgow Green also hosts the World Pipe Band Championships and Proms in the Park.  

Glasgow’s Arc de Triomphe

The McLennan Arch started life in 1796 as part of Robert and James Adams’ Assembly Rooms in the city centre. When these buildings were demolished, the arch was reconstructed at the northern edge of Glasgow Green. Since then it has been moved three more times, reaching its final resting place in 1991, a gateway to Glasgow Green’s western perimeter.

History matters: demonstrations, rallies and the birthplace of the industrial revolution

Glasgow Green has always been a focal point for popular demonstrations. In the 19th century, trade unionists and Chartists gathered in the park to campaign for workers’ civil rights. During the 1930s, at the height of the Spanish Civil War, thousands gathered in Glasgow Green to support the Spanish Republic against General Franco and his fascist allies. More recently, the park has seen rallies against war in Iraq and in support of Scottish independence.  

Close to the centre of the park, a statue of James Watt commemorates one of the driving forces of the industrial revolution. It’s believed that Watt came up with the idea for fixing the inefficiencies of the steam engine while taking a stroll on Glasgow Green. The moment of inspiration was the vital spark that would revolutionise Britain’s mining, iron, transport and manufacturing industries.

In the summer of 2020, a Black Lives Matter demonstration took place on Glasgow Green, and a notice was placed on the James Watt statue highlighting his role in the trafficking of enslaved people. History is being reassessed in Glasgow, a city that richly benefitted from the proceeds of the Virginia tobacco plantations and the slave trade.

A river runs through it

The River Clyde flows alongside Glasgow Green. In recent years, environmental protection regulations have cleaned up the river, and there are plans to make the Clyde a focal point of economic regeneration. However, the legacy of Glasgow’s industrial past continues to affect the river. A 2019 report by the Clyde Gateway regeneration agency revealed that toxic waste from a former chemicals factory was leaking into the river, posing risks to human health and the environment. Clyde Gateway and Glasgow City Council have been taking remedial action until a permanent solution can be found.

From carpets to cocktails

One of the most impressive architectural features of Glasgow Green is the Templeton Building. It was opened in 1892, and designed by William Leiper who modelled the building on the Doge’s Palace in Venice. The façade of the building reflects the exotic designs of the carpets that were made there for almost 100 years. The building has also been touched by tragedy. During construction, a gust of wind brought one of the walls down on a shed, where a large number of young women were weaving carpets. 29 of them died in the east end’s worst peacetime disaster.

Today, the Templeton building contains apartments, offices and a microbrewery. During the summer months of 2020, the bar extended its beer garden to create an open-air restaurant for visitors to meet together when the lockdown restrictions were relaxed.

A clean sheet

Almost from the start of its history in the 15th century, Glasgow Green was used for household washing and drying. The drying green, opposite the Templeton Building, was in regular use until 1977. The women of Glasgow washed their clothes in the nearby wash-houses (or “steamies”) and then chatted together while their weekly wash dried in the open air. Today, while the iron poles have been retained, they are rarely used for drying clothes.

On International Women’s Day in 2019, the drying green enjoyed a comeback when 30 bed sheets were hung to celebrate the work of women past and present. Local businesses sponsored each of the sheets, women gathered to celebrate their mothers and grandmothers, and the proceeds from the day went to charity.

The never-ending story

Glasgow Green is unique, but like so many other public parks around the UK, it is an important community resource, a gathering place and a link between the past and the present.

A study by the Social Market Foundation reported on research that estimated the wellbeing value of UK parks and green spaces at £32.4bn. A further 2020 report by NESTA highlighted the threat to parks as a result of budget cutbacks imposed on local authorities, noting that some councils have reduced spending on parks by as much as 87%.

But during the pandemic, the value of parks has suddenly become clearer, as individuals, families and communities have rediscovered the benefits of spending time in green open spaces. As visitor numbers have soared, councils have acknowledged the importance of parks. In March 2021, Liverpool City Council became the first UK local authority to legally protect the future of its parks and green spaces. As the council’s acting mayor observed:

“…the benefits aren’t just health related. Access to green spaces improves our neighbourhoods, tackles climate change, supports education and economic growth and they frequently become the stage on which we host many of our hugely popular cultural celebrations.”

That’s certainly true of Glasgow Green. More than 500 years after its establishment, the park continues to generate joy and jobs, stories and memories. Glasgow Green truly is a park for all seasons.


Further reading: more on parks from The Knowledge Exchange blog:

Guest post: How working from home could revitalise rust belt cities

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Michel Serafinelli, University of Essex

For years, we have been promised a work-from-home revolution, and it seems that the pandemic has finally brought it to pass. In April this year, at the height of the first wave of coronavirus, 47% of people in the UK were working from home, the vast majority of them doing so because of the pandemic. In a sense this is overdue: the work-from-home potential for UK employees is 32%; in France, Germany and Italy between 24% and 28%.

This structural transformation has the potential to at least partially undo another transformation from the previous century. With the decline of manufacturing in the United Kingdom after the 1970s, some cities – incuding Hull, Sheffield, Bradford and Stoke-on-Trent – entered a spiral of high unemployment and out-migration that has lasted to this day. This trend is echoed in other “rust belt” cities such as Saint-Etienne in France, Wuppertal in Germany and the American city of Detroit.

The rise of teleworking could end that spiral – if the right conditions are met.

The changing workplace

It’s unlikely that telework will end when the pandemic does – we will instead probably see workplaces encouraging a mix of in-office and home working. Some organisations may start asking workers to be in the office for only two to three days per week, while others may opt for a “conference model” (that is, a few consecutive days or a week per month for all employees).

This does not mean the death of big cities. London will probably stay attractive and innovative thanks to its very strong initial advantage. San Francisco and Seattle in US, Munich in Germany and Amsterdam in the Netherlands will all remain hubs for knowledge workers. Scholars believe face-to-face still rules when it comes to creativity, and such cities provide an environment that is conducive to innovation.

But rust belt areas are cheaper and can attract skilled workers to regularly spend more time there once the pandemic is over.

A busy street in Soho, London.
London will not lose its appeal. christo mitkov christov/Shutterstock

The job multiplier effect

How can formerly deprived cities thrive after the pandemic? To understand the potential for revitalisation of rust belt cities, we can invoke the job multiplier effect. This is where the presence of skilled workers helps create other jobs through increased demand for local goods and services. For example, after their day on Zoom (at home or in a local co-working space), skilled workers will want to go out. In this way they support a barista, a waiter, a chef and perhaps a taxi driver. Some will decide to renovate the house they live in, and ask a local architect. Once or twice a week they go for yoga. They may need a dogsitter when they travel.

This is not the only mechanism that could help with local revitalisation. Some of the people regularly spending more time in rust belt areas would be entrepreneurs, and we may see new business creation, as they seize new opportunities in industries such as culture, renewable energies, tourism, quality agro-food or handicraft.

In principle, therefore, our increased ability to work from home could lead to new growth opportunities.

Will it work?

But there are important caveats. Not all rust belt cities will be able take advantage of the post-pandemic world. After all, there were large differences in labour market performance after the 1970s, when the aggregate number of manufacturing jobs started to decline.

In the UK, both Middlesborough and Slough had 44% manufacturing employment in 1970. But their experience was vastly different in the three following decades, with Middlesborough employment declining by 13% per decade and Slough employment growing by 12% per decade. Places such as Norwich and Preston in the UK, Bergamo in Italy, and San Jose in the US were traditional manufacturing hubs that nonetheless performed well in the decades that followed the start of manufacturing decline in their countries.

To understand why we may see large differences across different cities again with the rise of working from home, we first have to think about differences in what economists call human capital endowments – this relates to the skills of the workforce in a particular place. For example, if locality A has a greater share of the workforce with a university degree than locality B, it has a higher human capital endowment and is more likely to recover from industrial decline.

The skill level of the workforce is important for the task of local reinvention – in our research team’s analysis of the reinvention potential for cities, we used the share of the workforce with a university degree as a proxy for this. To distribute these advantages across the board, scholars studying declining areas have called for measures aimed at boosting training and facilitating the assimilation of knowledge and innovation.

Another important challenge is the digital divide – the gap in speeds between areas with privileged access to the internet and the rest of the country. In the UK this is more than just a gap between urban and rural parts of the country – inner-city areas in London, Manchester, Liverpool and Birmingham are also left behind. A large reduction of this gap was important for job creation before COVID-19 – it should be a top priority now.

An overhead shot of a woman typing on a laptop at a table.
The UK’s digital divide affects cities too. marvent/Shutterstock

Local amenities also play a role. For skilled workers with family ties in a specific area, once they decide to regularly spend more time outside London, the choice of location is often pretty clear. For skilled workers without such ties, factors such as the cultural and recreational activities on offer in a new city become important, especially since they are used to a vibrant selection in London.

Overall, rust belt areas in Western economies face some opportunities for regeneration with teleworking, but there are also several important challenges. To maximise the potential for success, governments should consider measures that boost training, investment in high-speed broadband and improve transportation links between these cities and London.

These kinds of investments would help smaller cities such as Middlesborough, Hull and Stoke-on-Trent take advantage of the new opportunities presented by telework. Otherwise Manchester and, to some extent, other larger cities such as Birmingham and Liverpool could be the winners, among the rust belt, in the post-coronavirus work-from-home economy.

Michel Serafinelli, Lecturer in Economics, University of Essex

This article is republished from The Conversation under a Creative Commons license. Read the original article.


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Connecting the future: what is 5G?

By Scott Faulds

Over the years, as technology has evolved, the way in which we all use and access the internet has changed dramatically. The devices that can access the internet have shrunk and become portable, from laptops that allow us to work anywhere to smartwatches that we can use to play music from our wrists.

At the same time, as more devices have gained the ability to easily connect to the internet, our usage has changed massively; we now consume a great deal of audio and video online. This has become even more apparent during the Covid-19 pandemic, with many of us turning to video conferencing tools to work from home and keep in contact with our friends and family.

Additionally, in recent years, we have begun to see our homes, cars and cities become ‘smart’ via the power of the internet, enabling a whole new generation of devices that can connect and exchange data.

In response to changes in the way we all use and access the internet, the mobile network infrastructure has evolved to allow for greater bandwidths, lower latency and ultimately faster connection speeds. The next generation of mobile network technology – known as 5G – will facilitate new data-driven technologies, such as, automation, self-driving cars and artificial intelligence.

What is 5G?

5G is the next generation of mobile internet technology, which operates across a broad spectrum of radio waves that will allow for faster, always-on access to the internet. It’s estimated that 5G will enable internet speeds up to 600 times faster than those experienced on 4G networks today. This would allow you, for example, to download an ultra-high-definition movie in 25 seconds. The ability to transfer data at these speeds allows for technologies, such as artificial intelligence and autonomous vehicles, to operate effectively. Some experts claim 5G could lead to a new era of productivity and growth.

However, the physical infrastructure required to build a 5G network can be difficult to deploy. The fast speeds achieved by 5G networks rely upon what is known as millimetre waves, which operate at a higher frequency than our current mobile networks. These waves have a shorter range and can be easily disrupted by obstacles, such as buildings, people and even rainfall. Therefore, to ensure network reliability, a 5G network will have to operate across low, medium and high frequencies. Each of these frequencies will require separate network infrastructure and will have various trade-offs, in terms of speed and service area.

As a result of the distance and obstacle limitations of 5G, there will be a need for a dramatic increase in the amount of physical infrastructure required to ensure reliable service, particularly in built-up urban environments. According to a recent report by McKinsey, a 5G network will require 15 to 20 network access points per square kilometre in densely populated areas, compared with 2 to 5 network access points required for existing mobile networks. Subsequently, the cost involved with establishing this new infrastructure ensures that in the short-term, we are unlikely to see the launch of nationwide 5G coverage anytime soon.  

The power of data

The ability to exchange large amounts of data at speed can have a significant positive effect on our economy. Research from Barclays, indicates that the deployment of 5G has the potential to increase annual UK business revenues by up to £15.7 billion by 2025. Additionally, the ability to exchange data at speed opens up new opportunities for us to improve the efficiency of the operation of our cities.

The advent of the smart city, where everything from streetlights to trains can communicate with each other, can only truly come to fruition when combined with the data speeds facilitated by 5G networks. The main benefit of establishing a fully-fledged smart city is the ability for cities to become sustainably more efficient, through the extrapolation and analysis of data. For a smart city to be at its most efficient, the collection and analysis of this data will have to occur in almost real-time and will rely heavily on artificial intelligence and automation. 

A study conducted by Massachusetts Institute of Technology (MIT) found that in New York City congestion could be reduced by up to 75% through the deployment of a ride-sharing algorithm built using real-time data generated by taxis and incoming requests. The system would allow drivers to work shorter shifts, create less traffic, reduce air pollution and shorten commutes (with an average wait time of 2.7 minutes).

The creation of smart cities, underpinned by 5G, could potentially allow us all to live in cities which are more efficient and responsive to changes in our behaviour. Analysis conducted by Cisco, has revealed that the efficiencies generated by smart city technology could result in cost savings of up to $2.3 trillion globally.

Therefore, it could be said that 5G technology has the potential to allow businesses and governments to make costs savings and generate new forms of revenue.

Final thoughts

The deployment of 5G networks will provide the base for the technology of the future to operate and enable innovation to thrive. It is likely that the speeds and reliability offered by a fully-fledged 5G network could generate economic benefits and allow governments to make cost savings by leveraging big data to make our cities operate in a more efficient manner.

However, the deployment of 5G will be a complex and potentially costly undertaking, and it will be a long time before we see the establishment of nationwide 5G coverage. Therefore, although there is a wide range of benefits associated with the establishment of a 5G network, it should not be seen as a silver bullet that will generate instantaneous economic benefits.

Ironically, the future of high-speed internet, will take time and will require a great deal of investment before the benefits are realised.


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Shining a spotlight on Evaluations Online: Scotland’s essential economic development resource

Image: Marcus Winkler (via Unsplash CC)

The UK is currently at the beginning of what is expected to be the deepest recession in living memory. From a policy point of view, governments around the world are facing the daunting task of navigating a route through uncharted territory. As the recently launched cross-institutional Economics Observatory noted last month, “sound and non-partisan advice is needed to inform decision-makers across all parts of society, about the choices they face in dealing with the crisis and the recovery”.

Key role of economic development and sustainability in the Covid-19 recovery

As statistical analysis suggests that Scotland’s GDP fell 18.9% during the month of April, and that in May output remains 22.1% below the level in February, the need for a recovery approach that is based on empowering regions, cities and local communities is clear.

The independent Advisory Group established by the Scottish Government to advise on Scotland’s economic recovery in the wake of the COVID-19 pandemic, published its report at the end of June. This identified interventions to support Scotland’s economic recovery within the context of the strategic goal of shifting to a greener, fairer and more inclusive economy with wellbeing at its heart.

New economic development initiatives and programmes in response to the pandemic have already been launched in Scotland. Some are focusing on helping specific sectors such as tourism and the creative industries. There is also a recognition that it is important during the recovery to build on current strengths, such as inward investment and low-carbon technologies.

What works in economic development

Here at the Knowledge Exchange, we’re committed to supporting the use of evidence to inform policy development and practice. So in the light of the current importance of economic development, we thought we’d highlight a useful resource which makes available the results of evaluation work and research in order to enhance decision-making and investment in the future.

Evaluations Online is a public portal providing access to a collection of evaluation and economic development research reports commissioned by Scottish Enterprise, Scotland’s main economic development agency.

Ensuring that public investment generates economic and social benefits, and long-term inclusive growth for Scotland is core to Scottish Enterprise’s remit. Making evaluation and research reports publicly available supports this aim, as well as ensuring transparency.

Established for over a decade, the site now contains over 750 research and evaluation reports dealing with different aspects of economic development activity, such as business support, investment, sector growth and improving skills. All of the reports are publicly accessible and free to access.

Learning lessons from previous programmes

Developing the economic response to Covid-19 is happening at a much faster pace than usual policy-making cycles. It is important, though, that spending and investment is focused on areas that will have most impact, and will also contribute to the overall goals of supporting jobs, protecting and progressing education and skills, and tackling inequality. Considering lessons from previous interventions when commissioning new projects or allocating funding, is one way to address effectiveness.

It’s worth repeating that repositories of evidence can help bring about better policy in a number of ways:

  • improving accountability by making it easier for people to scrutinise the activities and spending of public sector organisations;
  • improving the visibility and therefore the impact of evidence;
  • helping identify gaps in evidence by making it easier to compare research findings; and
  • increasing our understanding of what works (‘good practice’), not only in the activities covered, but also in evaluation and research methods.

Evaluations Online offers resources in key areas such as entrepreneurship, regeneration, social enterprise, economic inclusion, skills development, financing, inward investment and commercialisation, as well as by sector. In recent years, questions about inclusive growth and generating social value have also become more important policy issues.

Some of the most popular recent reports added to the site have focused on:

It’s clear that there are huge sectoral and regional challenges within the economy which will need faced immediately and in the longer term, as a result of Covid-19. Business practices have changed, as have all our lives. But we believe that the use of evidence and research will be fundamental in successful recovery and the transition towards a greener, net-zero and wellbeing economy.


The Knowledge Exchange work with Scottish Enterprise to manage the Evaluations Online portal.

Evaluations Online is a publicly accessible collection of evaluation and research reports from Scottish Enterprise. The reports cover all aspects of Scottish Enterprise’s economic development activities and are available for download at no cost.

“Same storm, different boats”: addressing covid-19 inequalities and the ‘long term challenge’

MS Queen Elizabeth in Stornoway

The coronavirus pandemic has impacted upon almost every aspect of life.  However, this impact has not been felt by everyone equally. Some groups of people have been particularly badly affected – both by the virus itself and by the negative social and economic consequences of social distancing measures.  The phrase ‘same storm, different boats’ has been used widely to emphasise this.

The pandemic has exposed and deepened many of the deep-rooted inequalities in our society, including gender, ethnicity and income.  It has also shone a light on more recent inequalities too, such as the growth of precarious employment among sections of the population.

As we move out of lockdown, the long term consequences of the pandemic will continue to be felt unevenly across different sections of society, with those on the lowest incomes being most vulnerable.

As thoughts turn to recovery, there is a growing sense that now is the time to consider how we can create a more equitable society that benefits those most in need.

 

The long-term challenge

During a recent Poverty Alliance webinar, ‘Build Back Better: Poverty, Health and Covid-19: emerging lessons from Scotland’, Dr Gerry McCartney, Head of the Public Health Observatory at Public Health Scotland noted that the coronavirus pandemic was causing three concurrent public health crises:

  • the direct impact of the virus (through ill health and/or death);
  • the indirect impacts on health and social care services (e.g. reduced hospital admissions/referrals, delayed diagnoses); and
  • the long term unintended consequences of physical distancing measures

Dr McCartney’s recent research sets out the different groups at particular risk from covid-19 and outlines a number of ways in which the unintended consequences of physical distancing measures may negatively impact upon health via a complex set of pathways – including reduced physical activity, fear, anxiety, stress, boredom and loneliness, economic stresses related to reduced income and unemployment, the impact of the loss of education, as well as the risk of abuse and exploitation of children not in school, substance abuse, and domestic abuse and violence.

Dr McCartney has also been involved in a project that sought to quantify the direct impact of the pandemic in terms of years of life lost.  The results showed that, over 10 years, the impact of inequality on life expectancy is actually at least six times greater than the direct impact of the pandemic itself.

Dr McCartney referred to this as the “long-term challenge” and argues that in order to address these inequalities, it is crucial that society aims to ‘build back better’ following the pandemic.

Build Back Better

But what does this mean?  Put simply, Build back better argues that pandemic offers an unprecedented opportunity to refocus society on the principles of equity and sustainability.

A recent paper by the Wellbeing Economy Alliance (WEAll) sets out 10 key principles for ‘building back better’, covering a range of environmental, social and governance issues:

It highlights international examples of each of these principles in action, for example, speeding up the adoption of the doughnut economics framework in Amsterdam in response to the pandemic, and through the wellbeing principles implemented by the Wellbeing Economy Governments (WEGo) group, consisting of Iceland, New Zealand and Scotland (and recently joined Wales).

Indeed, in Scotland, the independent Advisory Group on Economic Recovery, established by the Scottish Government, have recently published their findings on how to support Scotland’s economy to recover from the pandemic.  It states that “establishing a robust, wellbeing economy matters more than ever”.

Unequal employment impact

One of the guiding principles set out by the Advisory Group on Economic Recovery is to “tackle inequality by mitigating the risks of unemployment, especially among groups hit hard by the crisis”.

Indeed, unemployment following the pandemic is unlikely to affect everyone equally – women, young people, BAME individuals and the low-paid are predicted to suffer the brunt.

In a subsequent Poverty Alliance webinar, ‘Addressing unemployment after Covid-19’, Tony Wilson from the Institute for Employment Studies (IES) highlights the scale of the problem.  He states that unemployment is rising faster than at any point in our lifetimes (barring a blip in 1947), and is likely to increase by 3 million as a result of the pandemic.

Again, the impact of this will be uneven.  Anna Ritchie Allan, director of Close the Gap, discusses the impact upon women in particular.  As well as being more likely to work in a sector that has been shut down, women are also more likely to have lost their job, had their hours cut, or been furloughed. As women are also usually the primary carers of their children, they have disproportionately affected by the closure of schools and home learning.

A recent report by Close the Gap highlights how the impending post-covid downturn is different than previous recessions, as the restrictions imposed to tackle the virus have impacted most heavily upon sectors that employ large numbers of female (e.g. hospitality, retail, care), as well as services that enable women’s participation in the labour market (e.g. nurseries, schools, and social care). Young and Black and minority ethnic (BME) women have been particularly affected.

For example, Kathleen Henehan, Research and Policy Analyst at the Resolution Foundation, considers how young people’s employment prospects have been affected by the pandemic. She notes that young people leaving education are likely to be worst affected.  However, again, inequalities exist – with those with lower levels of qualifications being particularly affected, and women and BME individuals within those groups affected most of all.

According to Anna Allan, policy to address unemployment as a result of the pandemic needs to be both gender-sensitive and intersectional – taking account of the fact that women are not one homogenous group, and ensuring that any job creation is not just providing more ‘jobs for the boys’.  For example, recent research by the Women’s Budget Group shows that investing in care would create 7 times as many jobs as the same investment in construction: 6.3 as many for women and 10% more for men.

Building forwards

In a third webinar, ‘Disability, rights and covid-19: learning for the future’, Dr Sally Witcher, CEO of Inclusion Scotland, suggests that as well as exposing and deepening existing inequalities, the coronavirus pandemic has created the scope for new inequalities to be created – ‘faultlines’ created by the differing impacts of the virus.

Dr Witcher questions the term ‘build back better’ – she asks whether indeed we should want to build back, when the old normal didn’t work for a large proportion of people, particularly those with disabilities. Dr Witcher also questions ‘who’ is doing the building, and whether the people designing this new future will have the knowledge and lived experience of what really needs to change.

Dr Witcher suggests that for any attempt to ‘build back better’ to be meaningful, it needs to reach out to the people that don’t currently have a voice – the people who have been most heavily affected by the virus.  Not only do these groups need to be involved, but they need to be leading the discussion about what a post-covid future looks like.

A post-covid future

Whilst the coronavirus pandemic has had a massive, devastating impact on people and economies around the world, it has created an opportunity to reflect on what is important to us as individuals and as a society.

There is strong public demand for change. According to a new YouGov poll, only 6% of the public want to return to the same type of economy as before the coronavirus pandemic.

Building back better recognises that addressing the causes of the deep-rooted and long-standing inequalities in our society is critical to a successful post-covid recovery.

There is also a need to protect and enhance public services, address issues of low-pay and insecure work, and prioritise wellbeing and the environment through a ‘green recovery’.

As Tressa Burke, of the Glasgow Disability Alliance, states:

History will recount how we all responded to the coronavirus outbreak.  We need to ensure that the story told demonstrates our commitment, as a society, to protecting everyone from harm, particularly those most at risk of the worst impacts of covid.”


For further discussion of the wellbeing economy, you may be interested in our blog post ‘How well is your economy? Moving beyond GDP as an indicator of success

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Guest post: Economic effects of coronavirus lockdowns are staggering – but health recovery must be prioritised

By Pushan Dutt, INSEAD

In all my years as an economist, I have never seen a graph like the one below. It shows unemployment claims in the US – observe the spike for the week ending March 21. The global financial crisis, the dot-com crash, Black Monday, oil price shocks, 9/11, none of these historic shocks are even visible in the graph.

Figures: US Department of Labor

 

The spike in unemployment claims is the proverbial canary in the goldmine. We should expect a swathe of bad economic numbers coming down the pipeline. The head of the St. Louis Fed expects a 30% unemployment rate and a 50% drop in US GDP by summer. More importantly, as the health crisis rises and crests at different times in different parts of the world, the horrifying numbers on GDP growth, unemployment, business closures are not likely to let up in the near term. Multiple countries are in a recession, and eventually, the whole world will fall into a deep recession.

The plunge from prosperity to peril will be as swift as the switch to lockdown protocols in most countries. We cannot even rely on the data we have to reveal the speed and depth of the crisis since this is collected and updated with lags. For instance, the US monthly jobs report for March collects data in the second week of March, failing to capture the massive spike in unemployment claims that appears after March 12.

In the meantime, sources such as restaurant booking website OpenTable can offer some insights into the magnitude of things. The figures below show the recent plummet in diners eating at restaurants in four countries. Observe a sudden stop in the entire restaurant industry by the third week of March.


Annual % change in restaurant diners from end of February to end of March.

Data: OpenTable

 

Combine a black swan event with missing data, and it is not surprising that markets are swinging violently.

Deep freeze

The question is not one of whether we are in a recession – we are. The more pertinent questions are: how long it will last? How deep it will be? Who will be impacted the most? And how swift will the recovery be?

These questions are complicated and even top economists must admit a lack of confidence in their answers. We are not experiencing a standard downturn. Nor is it simply a financial crisis, a currency crisis, a debt crisis, a balance of payment crisis or a supply shock.

We have not seen anything like this since the flu pandemic of 1918. Even there, identifying the effects of the flu is confounded by the first world war that took place at the same time. What we have here is something different. At its heart, we are experiencing a healthcare crisis with various parts of the world succumbing in a staggered fashion.

To slow down this global health crisis (the “flatten the curve” mantra), we have chosen to put the economy into deep freeze temporarily. Production, spending, and incomes will inevitably decline. Decisions to reduce the severity of the epidemic exacerbate the size of the contraction. While the initial decision to reduce labour supply and consumption are voluntary, this will likely be followed by involuntary reductions in both, as businesses are forced to lay off workers or go bankrupt.

Of course, government policies will attempt to mitigate these effects. Some are using traditional monetary and fiscal policies (cutting interest rates, quantitative easing, increasing unemployment insurance, bailouts). Others are trying out non-traditional methods (direct cash transfers, loans to businesses conditional on maintaining unemployment, wage subsidies).

Public health priority

How long the economic impact lasts depends entirely on how long the pandemic lasts. This, in turn, depends on epidemiological variables and health policy choices. But even when the pandemic ends, the resumption of normalcy is likely to be gradual. Countries will persist with a strict containment regime like in China today, and continue to impose travel restrictions to various parts of the world where the disease continues to spread.

The many factors at play in this complex, interlinked crisis that affects both people’s health and the global economy introduces massive uncertainty into anyone hazarding the pace, the depth and the length of the impact. As a result, we should treat any precise estimates (such as “GDP will decline by X%” or “markets have reached their bottom”) with scepticism.

Especially frustrating is the idea that there is a conflict between academic disease modellers and hard-edged economists saying that steps to slow the spread of coronavirus has trade offs. This could not be further from the truth. Among economists there is near unanimity that countries should focus on the healthcare crisis and that tolerating a sharp slowdown in economic activity to arrest the spread of infections is the preferred policy path. In a recent survey carried out by the University of Chicago, respondents universally agreed that you cannot have a healthy economy without healthy people.

The health crisis has naturally created a crisis of confidence. This, in turn, can have damaging long-term effects with continuing uncertainty leading firms and households to postpone investment, production and spending. Restoring confidence requires a singular focus on containing and reversing the spread of COVID-19.

Slowing the rate that people fall ill with COVID-19 is not the end in itself. It is a means to temporarily reduce the pressure on hospitals and give time to identify treatments and a vaccine. In the interim, we must build testing capacity, perform contact tracing, setup the infrastructure for extended quarantines, rapidly expand the production of masks, ventilators and other protection equipment, build and repurpose facilities into hospitals, add intensive care capacity and train, recall and redeploy medical personnel.

All of this is also the way to restore the economy’s health and economic policy must complement it. In the short run, economic policies should mitigate the impact of lockdowns and ensure that the current crisis does not trigger financial, debt or currency crises. It should focus on flattening the recession curve, ensure that the temporary shutdown has only transient effects, and facilitate a quick recovery once the economy is taken out of the deep freeze.

In the meantime, it’s important to also recognise that this is an unprecedented crisis. Everybody has their role to play, but nobody is infallible and uncertainty is inevitable.

Pushan Dutt, Professor of Economics, INSEAD

This article is republished from The Conversation under a Creative Commons license. Read the original article.


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Shared Prosperity Fund – greater productivity and inclusivity for Scottish cities?

new bridge glasgow

There are many questions surrounding the UK’s departure from the European Union, not least on the future of funding.

In Scotland’s regions and cities, EU Structural Funds have provided significant additional funding to support economic development for many years. The current structural funds programme is worth about €10.7 billion to the United Kingdom and up to €872 million to Scotland across the seven-year budget period which ends in 2020. The Funds were originally created to help rebalance regional social and economic disparities. With regional inequality a dominant feature of the current economic landscape, and the potential of Brexit to further exacerbate this inequality, continued investment to address this is vital.

The UK Government has made no commitment to continue with the EU Structural Fund approach following exit from the EU and has instead proposed to introduce a domestic successor arrangement – the Shared Prosperity Fund (SPF). The objective of the SPF is to “tackle inequalities between communities by raising productivity, especially in those parts of our country whose economies are furthest behind.” This objective is widely welcomed. However, as yet there has been no formal consultation on the new Fund and no detail on how it will operate.

Nevertheless, it had been suggested in recent research from the Core Cities Group on Scottish cities that despite the significant contribution from Structural Funds over the years, the proposed SPF could be an opportunity for greater productivity and inclusivity.

Success of EU Structural Funding

The two major EU Structural Funds utilised in Scotland are the European Social Fund (ESF), focusing on skills and jobs, and the European Regional Development Fund (ERDF), which focuses on correcting regional imbalances.

Over £134m per annum is being invested in economic development in Scotland through these funds over the current programming period, which is supported by a significant amount of match funding, largely from the public sector. According to the Scottish Government, the total funding will be around €1.9 billion.

The Scottish Cities – the collaboration of Scotland’s seven cities (Aberdeen, Dundee, Edinburgh, Glasgow, Inverness Perth, and Stirling) – and city regions have already successfully invested in each of the four Scottish Economic Strategy priorities (innovation, investment, inclusive growth and internationalisation) and the UK Industrial Strategy’s five foundations of productivity (ideas, people, infrastructure, business environment and place).

Some examples of projects include:

Research suggests that the ending of such funding poses a risk to organisations and the positive economic impact gained, as illustrated by reductions in funding in other areas of the UK.

Limitations

Despite the successes that have been achieved through the use of Structural Funds, the approach is not without its limitations. As argued by the Core Cities report, the approach to managing, overseeing and using the funding has become more bureaucratic and cumbersome. Particular issues highlighted include:

  • increasing centralisation of funding and decision-making;
  • the requirement to provide match-funding at an individual project level becoming increasingly problematic due to public sector budget cuts;
  • monitoring, compliance and audit requirements have become increasingly onerous;
  • in the current programme period, the role of the Managing Authority has become more transactional, with little engagement at the project development stage;
  • eligibility rules restrict what can be funded, with some important elements of economic development no longer able to be supported e.g. new commercial premises, transport infrastructure, which can limit the benefits from other Structural Fund investment (such as business growth and employment creation on strategic sites);
  • the system does not encourage innovation, with high levels of risk aversion amongst programme managers, and a high degree of risk for project sponsors if project delivery does not proceed as planned – a particular issue for projects working with the most disadvantaged groups and those with complex needs.

The report argues that these factors have had the effect of limiting the achievements of the Funds, such as preventing some organisations from applying for funding, which in turn has made others wary about applying. This has led to projects being designed to meet the funding criteria rather than maximising benefits, resulting in too much time and effort on administrative activities rather than those which will have an impact on the economy.

As such, it is suggested that the introduction of the SPF affords an opportunity to change this.

Opportunity for change

According to the report, there is an opportunity to move away from the limitations of the Structural Fund programme approach to more effective arrangements that will increase productivity and contribute to a more inclusive economy. There is scope to increase the funding available through the SPF, reduce bureaucracy and become more responsive to local need.

It is suggested that there is potential for SPF investment in the Scottish Cities to deliver an economic dividend of up to £9bn as productivity increases, producing higher wages at all levels in the workforce, and contributing to a more inclusive economy overall.

Given that Scotland’s performance on some of the key economic indicators is likely to be taken into account when allocating SPF – GVA per job and per hour worked, employment rate, deprivation levels – the report also contends that there is a case for a greater share of the SPF for Scottish Cities. It argues that significant SPF investment in these areas “…will increase competitiveness and tackle inequality, as set out in Scotland’s Economic Strategy, as well as contributing towards the objectives of the UK’s Industrial Strategy, raising productivity and reducing inequalities between communities”.

The report warns that “Scotland will not make significant progress towards a more inclusive economy and society without addressing the deprivation challenges in the Scottish Cities.”

It is recommended that:

  • the SPF should use a transparent, needs-based allocation system;
  • the SPF budget should not be determined by previous levels of Structural Funds, and should be significantly increased; and
  • the Scottish Cities must be closely involved in the design of the SPF.

Final thoughts

There appears to be wide consensus for providing a replacement for EU Structural funding. Most organisations that have commented on the proposed SPF also agree that the level of funding should at least be maintained at its current level.

The concerns in Scotland, and indeed the other devolved legislatures, is the impact the SPF might have in devolved decision making powers currently exercised under EU Structural Funding.

The Scottish Cities have made clear their views on the proposed SPF and the Scottish Government has also launched its own consultation on how the Fund might work for Scotland.

Only time will tell whether the UK Government will take these comments on board, and indeed whether the opportunity for change will be realised at all.


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How well is your economy? Moving beyond GDP as an indicator of success

by Scott Faulds

Since the early 20th century, the predominant method of evaluating the success of a country has been through the metric of Gross Domestic Production (GDP). This measurement is based upon the assumption that economic growth is the key indicator of a successful country.

In recent years, this assumption has been challenged, with politicians and economists, arguing that the focus on GDP has led to the development of policy which values economic growth at the expense of the wellbeing of society.

Following the 2018 OECD World Forum, Scotland, Iceland and New Zealand, have formed a group known as the Wellbeing Economy Governments, to share best practice of how to build an economic strategy that will foster societal wellbeing.  Additionally, organisations such as the OECD, European Commission and United Nations, are all conducting research into the development of policy beyond GDP. Therefore, it is clear that the previously held consensus surrounding the use of GDP has begun to break down, with countries across the world searching for different ways to evaluate the success of policy.

We must forge ahead with progressive economic policies that defy common stereotypes about costs and benefits and keep on promoting gender equality as part of a forward-looking social justice agenda

Katrín Jakobsdóttir
Prime Minister of Iceland

 

What’s wrong with GDP?

According to the International Monetary Fund (IMF), GDP is the measurement of the monetary value of all final goods and services produced within a country during a given period. However, it should be noted that this measure excludes unpaid work and the economic activity of the black market. Simon Kutzents, the modern-day creator of GDP, argued that whilst GDP was effective as a measure of productivity, it should have never been used as an indicator of the welfare of a nation.

Critics of GDP contend that the measure is overly simplistic, due to its interpretation of a successful country as one which is experiencing economic growth, arguing that some countries with growing economies have many social problems. For example, in China GDP grew by 6.6% last year whilst levels of inequality rose faster than in other countries, and society faces a great deal of political oppression. Therefore, it can be said that GDP does not provide a true picture of the success of a country, as it fails to consider societal problems, such as inequality and political freedom.  

The wellbeing approach

As a result of growing criticism of the use of GDP, several countries have started to look at alternative approaches of measuring success which considers factors beyond economic growth. This has led to international interest around the concept of wellbeing, a desire to create policy to improve the wellness of society.

This can manifest in a variety of different forms, from Scotland’s National Performance Framework to New Zealand’s Wellbeing Budget –  both policies designed to help improve the health of society rather than solely increasing economic growth.

However, this should not be interpreted as a movement away from encouraging businesses to grow; rather the Wellbeing Economy Governments believe that by improving the wellbeing of society they will indirectly stimulate sustainable economic growth.

“We need to address the societal well-being of our nation, not just the economic well-being

Jacinda Ardern
Prime Minister of New Zealand

As a result of creating a budget justified by improvements in societal wellbeing, New Zealand has invested record levels of funding into supporting the mental wellbeing of all citizens, with a special focus on under 24s. Additionally, the budget prioritises measures to reduce child poverty, reduce inequality for Māori and Pacific Islanders and enable a just transition to a sustainable and low-emissions economy. New Zealand believes that by tackling these inequalities, economic growth can be stimulated in ways that benefit all New Zealanders, where improvements in mental health alone could lead to an increase in GDP of 5%.

Therefore, whilst GDP isn’t the main priority of policy making under the wellbeing approach, it is possible for economic growth to occur as a result of implementing policy designed to improve the wellbeing of society. After all, according to the World Health Organisation, a healthier and happier society is a more productive society.

How well is well?

It is evident that the use of GDP as a measure of a country’s success has faced a great deal of criticism in recent years. However, some economists are not ready to give up on GDP quite yet. They argue that whilst GDP is not a perfect representation of a country’s success, neither is the wellbeing approach as it can be incredibly difficult to quantify societal wellness.

For example, if we compare one citizen who is in poor health and lives in an area experiencing low-levels of crime with another citizen who is healthy and lives in an area with high-levels of crime, how can we quantify which citizen has the better level of wellbeing?

In short, critics of the wellbeing approach argue that whilst it is vital that society’s wellbeing is considered during the policy-making process, basing policy solely around wellbeing is ineffective and would be incredibly difficult to measure, due to the personal nature of what constitutes wellbeing.

“Growth in GDP should not be pursued at any or all cost … the objective of economic policy should be collective well-being: how happy and healthy a population is, not just how wealthy a population is.”

Nicola Sturgeon
First Minister of Scotland

Final Thoughts

In summary, whilst there is a great deal of international interest in the possibility of a movement away from GDP, no consensus has yet formed as to whether the wellbeing approach is the way forward. With all new forms of policy, other countries often wait to see if early adopters succeed before following their lead. Perhaps it will be left up to smaller countries to prove that an economic policy focused on wellbeing can be successful.

Until then expect to see a great deal of interest in New Zealand’s implementation of the Wellbeing Budget and the results of the second meeting of the Wellbeing Economy Governments in Iceland this autumn.


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