The case for Manchesterism: A call for democratic control of the supply side
The 2008 financial crisis exposed the limitations of monitoring individual banks for individual risks. The response, macroprudential regulation, reshaped financial regulation but has yet to address the supply-side issues plaguing the British economy. The author argues that the British state continues to operate a pre-2008 supply-side regime, resulting in a compounding crisis of living costs, productive capacity, and public finances. The solution lies in the Productive State, a public institutional architecture for the supply side that intervenes at the sites of instability, extraction, and underinvestment. This approach, exemplified by Andy Burnham's Greater Manchester program, offers a path towards a more inclusive, resilient, and democratic society.
The author critiques the privatisation of essential services, highlighting its structural features that prioritize private profit over social necessity. They argue that markets fail to coordinate production in foundational sectors, leading to rent extraction, underinvestment, and the transfer of risk to those least able to bear it. The existing policy toolkit, dominated by a binary of market coordination and welfare state redistribution, is insufficient to address these issues. Instead, the Productive State emerges as a third pillar, producing essentials directly through public ownership and operation.
The Productive State offers sovereignty advantages, including price sovereignty, supply chain sovereignty, and ownership sovereignty. It delivers stability, abundance, and security through public corporations that can plan for long-term paybacks, lower the cost of capital, and optimize sectors as systems. The author outlines five criteria for intervention, emphasizing the need for private ownership to generate dynamic gains in essential sectors. Manchesterism, as demonstrated in Greater Manchester, showcases the success of public control in reducing costs and fostering economic dynamism.
The author addresses objections, including fiscal and financial concerns, institutional capacity, and the lack of a coalition. They argue that the Productive State can be financed through revenue-backed public corporations and that state capacity can be built through institutional investment and operational experience. The political courage to act and the movement to make transformation real are essential for change.
In conclusion, the author presents three paths for advanced economies: external expansion, stagnation, or the socialisation of investment. The Productive State represents the third path, offering stability, abundance, and security through democratic control of the supply side. The choice is clear: embrace the Productive State or face the consequences of a compounding crisis.
