Developing an Economy of Belonging

Juan Manuel Moreno

The prosperity of individuals and communities cannot be reduced to aggregate analyses of income, wealth, productivity, or GDP; these issues are affected by a series of factors including geography, institutions, culture, infrastructure, and governance, the weight and significance of which remain poorly understood.

At the IGP, we think that prosperity and wellbeing encompass a series of effects produced in specific times and places through the relationships established by living well together in functioning social, economic, political, and ecological systems. Furthermore,the close relationship between political institutions, citizen needs and perceptions, and successful economic transformation in the 21st century has laid down new parameters and created new forms of uncertainty and volatility.

In the current context of the Covid-19 crisis, understanding these relationships and identifying what the priorities, infrastructures, and mechanisms necessary for developing an economy of belonging, make exploring how to integrate emerging macroeconomic analysis with more local level knowledge an urgent matter.

This is definitively different from policies formulated through demands to raise GDP, prevent overheating in the economy or determine labour market performance that have for a long time being the main goal of economic policy as a pathway towards prosperity. It requires instead a new approach directed towards quality of life and long-term prosperity of people and places.

Our research explores how macroeconomics can take account of these new uncertainties by setting up the case and challenges for developing an economy of belonging and reworking the relationship between economic policy and matters of place, livelihoods, infrastructures, and life experiences at the local level.

We examine these challenges through three interrelated working papers (WPs) in order to identify and understand what are the priorities, infrastructures, and mechanisms necessary for macroeconomics to take account of those left behind by structural disadvantage and how these interrelate at the local level.

In WP1, Identifying and understanding local priorities for developing an ‘Economy of Belonging’: A case study of eight areas in the UK, we conduct a mixed qualitative and quantitative comparative analysis of eight local areas across four regions in the UK to understand the interconnecting factors affecting individuals’ and communities’ quality of life and prosperity. First, we examine Understanding Society Survey data from 2009-2018 waves to explore individuals’ lived experiences using a multi-level hierarchical analysis. Second, we examine the eight case study areas across a series of datasets and indices at the local authority (LA) and lower-local super output area (LSOA) levels, using an integrated analytical framework based on life outcomes, life opportunities and life together (LOOT framework), we are able to identify and understand the interrelationships of factors that are neither immediately evident to the individuals living in a specific region (micro-level), nor well captured through aggregate inter-regional variations (macro-level).

In WP2, How effective are political cycles in the UK in the micro-level, we look at political budget cycles and trust at the sub-regional level across the UK. The aim of the paper is to examine whether political cycles are effective in the micro level or not. Looking at public spending at different levels of aggregation (i.e. central governmental policies, regional policies, sub-regional policies) findings suggest that in the UK political cycles are effective to a certain degree but not enough to swing public opinion or electoral outcomes.

In WP3, Europe in crisis: political trust, corruption, and austerity, the research attempts to identify what makes individuals report a particular level of trust towards their national government and why in Europe such trust is declining. At first, the paper attempts to lay the theoretical grounds of what affects trust decisions. Subsequently, we attempt to explore the question empirically by analysing data from the Eurobarometer (2005-2018). Using a multilevel logistic regression, we combine micro and macro characteristics to also explore the role of perceived corruption in this process. Results suggest that corruption is a significant determinant of trust in national governments, particularly where austerity was present.

The findings from the research show that building an economy of belonging requires us to attend to what is happening at the meso level. That is shifting the scale of analysis and the scope of economic policy from inter- to intra-regional variation, as it is ‘place’ where individual's lived socio-economic realities become meshed with the structural determinants of the economy.

The Developing an Economy of Belonging research project is a collaboration between IGP and the Rebuilding Macroeconomics Network.