Wealth Economy Report says government must invest in social, natural and physical assets for pandemic recovery and to deliver on levelling-up.
The insight that a sustainable and resilient economy and society require investment in the whole range of assets that constitute true wealth is shared by more and more policymakers and business leaders. This shift is welcome but it is being accelerated by the fact that society is facing some profound challenges.
One is, of course, the pandemic and its impact on economies and societies. Another aspect of social fracture in many countries is its geography, and the need to ‘level up’ those places where people have had too few opportunities to get on in life.
This need to focus on the ‘where’ as well as the what, why, and when also speaks to another underlying issue, concerning many governments before the pandemic: disappointing growth in productivity for at least the past decade. Economists regard productivity as a key indicator of long-term economic prosperity, closely related to increases over time in wages and living standards.
There has been an immense amount of economic research on barriers to productivity growth but far less on how they relate to each other, as well as on the need to co-ordinate policies and decisions by business and individuals. Investment is needed in all of the components of wealth because they complement each other. The returns to any single element will be higher if they are treated as a portfolio. A key part of the Wealth Economy project is understanding those links: how do nature, health, and education interact to make people productive? What role does trust play in investment in conventional physical assets?
This report by the Wealth Economy team focuses on the practical, immediate policy lessons emerging from our approach. The pandemic, alongside mounting evidence of the consequences of climate and biodiversity crises, has opened many people’s eyes to the fact that this is a fork in the road. Building back is not the challenge; it is Building Forward to something better.
Without adequate buffer stocks, whether that is proximity to clean air and green space for all, or sufficient investment in skills that people can adapt, or communities where neighbours want to help others, there is no resilience.
Professor Diane Coyle