Posts Tagged ‘Economy and Society’

Helen Pankhurst on how far women’s rights have come since the suffragettes

Women are still fighting for equality, despite huge progress since the suffragette campaigns. How far have we still to go and how might we get there? Helen Pankhurst draws on her new book to provide some answers.

How far have women’s rights come since the battles on the streets of London between the political establishment and the suffragettes? How far since the land now occupied by the LSE was at the heart of the fight as the headquarters of the Women’s Social and Political Union? The area that students, teachers and other staff all tread today is also where the suffragettes had a tea-shop – logistically and socially an important space for the women – and where their journal ‘Votes for Women’ was printed. Time divides us but the physical space, the ground we walk on, is the same.

So how far have we come? It was with this question in mind that, building up to the centenary of when some women (i.e. propertied women over 30 and those with a university education) finally won the right to vote, I started work, myself linked to the LSE as a visiting Professor then a Visiting Senior Fellow. I interviewed hundreds of women, and looked at secondary sources, including the ephemera and other documents housed at the wonderful Women’s Library – another link with LSE. The result is the book ‘Deeds Not Words: The Story of Women’s Rights, Then and Now’.

The suffragettes and other suffrage pioneers took their courage in their own hands, refusing a destiny that subordinated them. In the process, they changed laws and social norms. Talk to many families around the UK and that idea that women’s vote was particularly hard-won and therefore particularly precious still resonates. It is the view that women must vote and engage more widely in politics because other women sacrificed so much – including their lives – for this right.

Equally important is the point that the establishment rewards those who vote. The result is a vicious cycle, repeated and exacerbated by the linked, equally vicious circle around representation in parliament and all the barriers of not just to being elected, but also to having a voice and then a whole other cycle around being able to use that voice to progress specific gendered rather than party political interests. Women now make up 32% of the House of Commons, 26% of the House of Lords with not totally dissimilar figures in the devolved assemblies, in local government and in the legislature. Furthermore, we have had women in many of the top political appointments, however, few are those would argue that in politics and policy we have got to our end destination.

Moving away from politics narrowly defined, how have we progressed in terms of the different areas of women’s lives? In terms of women at work and their financial position? Their sense of identity as women and their relationships with their families? What about women’s agency and portrayal in culture? Attitudes towards the sexualisation of women and issues of violence against women? These are all massive areas to explore and many are intertwined in terms of their effects. These are the issues looked at in my book providing a broad-sweep overview with the use of quotes from my interviewees and many statistics to help to tell a nuanced story. At the end of each of these chapters I also score the progress from zero to five – encouraging my reader to do likewise – to be able to weigh up progress across different aspects of women’s lives. I ended up giving the highest score for the chapter on culture and the lowest for the chapter on violence.

One of the clear themes, explored in most depth in a chapter on power, which also looks at the issue of intersectionality, is that the opportunities for many women and girls have increased, through the agency of individuals, through the challenge to social norms and through structural legal change – in fact for the most part through a combination of the three. But although the progress in many areas is tangible, there is the need to qualify this rosy conclusion: change isn’t always unidirectional, nor does it benefit all.

Most importantly for an activist, the question explored in the epilogue, is how can we speed things up? What can we do in the next decade to 2028, the year women and men were finally granted the rights to vote on the same grounds? And we really must keep vigil for we assume progress at our peril as Mitch, a retired prison governor put it:

Change can sometimes be of the elastic band kind. You take the strain and stretch forward for progress. You begin to see real change, new motivations, a future. And then you ease the pressure – you tire, you’re moved to a new post, vital funding is cut. And the elastic band does what it does best, snaps back to its original shape. You just can’t let up the pressure, can’t relax, can’t ever believe the job is done. And that’s the mistake feminists and feminist institutions make, believing that an issue is solved, and it’s OK to take your eye off the ball.

My call is for us all to do our bit in stretching the elastic band, to be part of the transformation in our own personal and professional lives, to keep stretching it until it can no longer snap back. Role modelling egalitarian practices at home, in parenting, and caring are also for many people the place from which we can be most effective at disrupting patterns of gender inequality. At work, it includes always being conscious of who is at tables of influence, who is speaking, even more subtlety who is being heard and who is expected to take the back seat and provide support. It is all about being conscious of entitlements and then, personally and collectively, disrupting them to ensure they no longer drive and perpetuate the agenda.

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Note: the above draws on the author’s latest book, ‘Deeds Not Words: The Story of Women’s Rights, Then and Now’, published in 2018 by Sceptre.

About the Author

Helen Pankhurst is an international development and women’s rights activist and writer, a senior Advisor to CARE International, a Visiting Professor at MMU and was a Visiting Senior Fellow at the LSE in 2018.

 

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Public Domain.

Work and social norms: why we need to challenge the centrality of employment in society

Why do the unemployed often suffer from poor physical health and wellbeing? Daniel Sage argues that it is the importance we attach to the ‘work ethic’ that shapes the experience of unemployment, and so to deal with the harmful effects of unemployment we must challenge the centrality of paid work in our lives.

Unemployed people tend to have significantly worse health and wellbeing compared to people in paid work. With hundreds of empirical studies, this is one of the most persistent findings in social science research and holds across time and place.

In trying to explain the impact of unemployment on health, researchers have often been drawn to the social psychologist Marie Jahoda’s influential theory. Jahoda argues that the main problem for unemployed people is that they are unable to access all the positive goods that employment provides: time structure, social activity, teamwork, regular activity and status. In other words, there is something uniquely valuable about paid work for human health and happiness. The best way to deal with the harmful effects of unemployment therefore is to promote work: either through policies like job guarantees or, alternatively, active labour market programmes, which often mimic the environment of work. Promoting, or even enforcing work, can be seen as both a logical and benevolent solution to the maladies of unemployment.

In a recent article I challenge the view that equates paid work with happiness and human flourishing and, conversely, unemployment with the opposite. Rather than somehow being innate to human happiness, I argue that the reason why people in work report such higher life satisfaction is because of the power of social norms and, more specifically, the dominance of the work ethic. In societies that glorify employment as a signifier of identity, respect, and status – and promote paid work as the overriding route to life meaning and worth – it is little wonder that those who are unemployed suffer terribly.

The power of the work ethic in shaping the experience of unemployment can be seen empirically in numerous studies. Unemployed women in countries with high female employment rates suffer more compared to unemployed women elsewhere. Unemployed people who retire experience a significant upturn in their wellbeing irrespective of income gains; they are freed from labour market expectations and there is thus no shame not to work. Daily wellbeing data captured by smartphones shows how paid work is one of the least pleasurable activities people engage in. People do not find pleasure and satisfaction in the actual activity of working but the status and identity that having a job provides.

My own analysis of the European Values Study supports this other research, demonstrating how unemployed people who subscribe less to employment norms tend to have higher wellbeing than those who have stronger work ethics. To put it simply, if you care less about the social value placed on paid work, then unemployment is likely to be a less soul destroying experience than if you care deeply about the importance of work.

These studies have important implications for how we understand unemployment and how we deal with its effects. They suggest that the most powerful way of confronting the harm caused by unemployment is to challenge the power of the work ethic. In this light, attempts to combat the negative health effects of unemployment by emphasising paid work – either with job guarantees or activation programmes – is likely to be counter-productive in the long-term. These interventions reinforce the power and centrality of the work ethic, whereby unemployed people are expected to conform or are coerced into subscribing to the very norms that promote their shame in the first place. The work ethic is both the cause of unemployed people’s misery and the route to escape it.

To combat the harm of unemployment more effectively and enduringly, it is necessary to challenge the importance paid work has to human identity.  The starting point is to consider social policy reforms that change people’s relationship with work: including the value we attach to work, the time we devote to work, and how work frames our judgements of other people.  This will not be easy. In the UK at least, there is a political climate in which both the mainstream Left and Right see paid work as a solution to all manner of economic, social, and moral problems. We are a society divided into ‘strivers and skivers’ and where work frames many social interactions and relationships.

Yet it is possible to imagine policies that are viable within current political, economic and welfare state structures that still hold the radical objective of reconstructing work and the work ethic. Universal basic income (UBI) is one such policy. UBI has many admirers and proponents across the political spectrum, yet a particularly powerful case can be made for the potential UBI has to recast what work means. UBI could dilute the work ethic by making it easier and more common for people to opt out of the labour market: to retrain, get more education, care or enjoy more leisure. The boundaries between work and non-work could blur and our understanding of what ‘work’ means could widen. As the social category of ‘the unemployed’ became more ambiguous, there could be far less shame, and fewer harmful effects, of not engaging in paid work.

There are also other, arguably less radical and more politically viable, policy alternatives for challenging the work ethic. These include expanding paid parental leave for mothers and fathers, enabling people to work fewer hours and empowering people to take periods of paid leave (sabbaticals) from work. We could even, as Jeremy Corbyn suggests, have more bank holidays, although perhaps not only whenever England win a World Cup.

Ultimately, the objective of all of these policies would be to obscure the boundary between work and non-work by enabling people to work less. This could expand our common understanding of what ‘work’ means beyond its current form as a purely economic relation. In this light, people would be empowered to find value, identity, status and reward in forms of work that do not involve wage-labour. And then the misery long found in the experience of unemployment could finally disappear.

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Note: the above draws on the author’s published work in Critical Social Policy.

About the Author

Daniel Sage is Senior Lecturer in Social Sciences at Edge Hill University.

 

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Pixabay/Public Domain.

Why a customs union is key for multinational companies to stay in the UK after Brexit

In a customs union, goods cross borders seamlessly; in a free trade agreement, border checks are needed to ensure conformity with rules of origin. Paola Conconi explains why a customs union is key for multinationals wishing to stay in the UK after Brexit.

Some in Theresa May’s Cabinet are pushing for a ‘soft’ Brexit, which would allow the UK to remain close to the European Union’s (EU) single market and customs union. Others favour a ‘hard’ Brexit and aim to strike a trade deal similar to CETA, the ‘comprehensive economic and trade agreement’ concluded between the EU and Canada. Multinational corporations with plants in the UK favour a soft Brexit.

In a leaked report, the Japanese government points out that 879 Japanese companies, including manufacturing giant Hitachi and carmakers Honda, Nissan and Toyota, employ 142,000 staff in the UK. It calls on the prime minister to keep the UK in the EU single market and customs union, warning that Japanese companies may otherwise relocate to continental Europe. On 8 February 2018, Mrs May met Koji Tsuruoka, Japan’s ambassador to the UK, and representatives of major Japanese companies including carmakers, other manufacturers and banks. Speaking after the meeting, the Japanese ambassador reiterated the warning that his country’s firms will leave the UK if Brexit makes it ‘unprofitable’ to stay, saying ‘If there is no profitability of continuing operations in the UK, not Japanese only, no private company can continue operations’.

Multinational companies like Honda and Nissan have long used the UK as their base to serve the European market. For example, almost 80% of the cars manufactured by Nissan in its plant in Sunderland are currently sold to consumers in the rest of Europe. EU membership guarantees regulatory alignment with the rest of Europe and duty-free treatment. Exit from the single market would imply that UK and EU regulations are no longer automatically aligned. More importantly, exit from the customs union would mean that multinationals may face high tariffs if they want to serve EU customers from the UK.

This may seem surprising given that in free trade agreements like CETA, tariffs on most manufacturing products are slashed to zero. The key difference is that within a customs union, goods cross borders without any checks at all. By contrast, in a free trade agreement, shipments need to be checked by customs authorities to ensure that they conform with ‘rules of origin’ – criteria on the minimum domestic content in a given product. Only goods that comply with these rules are considered as originating from member countries and are granted preferential tariff treatment. Satisfying origin criteria is straightforward for simple goods like iron ore but is much more complicated for goods like cars, which are produced in international value chains using components from around the world.

In our recent study, we show that rules of origin in free trade agreements distort global value chains, deterring final goods producers from importing inputs from non-member countries. We construct a unique dataset of the rules of origin contained in the North American Free Trade Agreement (NAFTA), the world’s largest free trade agreement: for every final good, we can trace all the inputs that are subject to rules of origin requirements; similarly, we can link every intermediate good to the final goods that impose rules of origin restrictions on its sourcing.

Exploiting cross-product and cross-country variation in treatment over time, we show that NAFTA rules of origin led to a sizeable reduction in imports of intermediate goods from third countries relative to NAFTA partners. In terms of magnitude, our estimates imply that imports of affected intermediate goods from non-NAFTA countries would have been around 45% higher in the absence of rules of origin. Our study helps to explain why Japanese multinationals may pull out of the UK in the event of a hard Brexit. Companies like Honda and Nissan rely on global supply chains. For example, key components for the models they produce in the UK are imported from Japan. Right now, they can automatically sell the cars they produce in the UK to the rest of the EU at zero tariffs.

But in the event of a UK-EU free trade agreement, they would face a trade-off if they decide to remain in the UK: stop importing key components from Japan and other nonmember countries to comply with rules of origin and obtain duty-free treatment; or keep their global value chains in place, but face a 10% tariff when exporting their cars from the UK to the EU. Relocating to continental Europe would allow them to remain in the customs union, avoiding this trade-off. Leaving the customs union would thus be more problematic than envisaged by both voters and politicians at the time of the Brexit vote.

It would not only raise the possibility of a hard border between Northern Ireland and the Republic of Ireland, endangering the reconciliation process between them; but it may also lead multinationals to move out of the UK, resulting in the loss of thousands of jobs. If the government decides to go for hard Brexit, it should make sure that the rules of origin it negotiates with the EU as part of the new trade deal are as flexible as possible, to minimise the distortion of global supply chains and the risk of relocation of multinationals.

The devil is in the detail: what threshold of minimum domestic content is agreed on cars may, for example, determine whether companies like Honda and Nissan remain in the UK or move to France or Germany.

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Note: This article draws on a co-authored CEP Discussion Paper No. 1525, forthcoming in the American Economic Review. It appeared originally on LSE Brexit.

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About the author

Paola Conconi is Professor of Economics at the Université libre de Bruxelles (ULB) and Visiting Professor at CEP’s trade programme.

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image: United States Navy, ID 061209-N-8148A-067

The new State Pension is rolling out – but few people know if and how it will affect them

How well does the public understand the roll out of the new state pension and how it will impact them? Kirby Swales draws on joint NatCen and Pensions Policy Institute research to explain that there is a general lack of awareness which, unless addressed, can lead to financial hardship for people in the future.

The State Pension is not the most topical subject in policy research circles, but it is hugely important. It is the single largest item of social security expenditure – about £92bn at the last count. It is the largest source of income in retirement. However, people are yet to realise the importance of the new State Pension and the changes it will bring, according to new research.

You will have probably heard about the change in State Pension age, especially for women aged 60-64. However, there have been really significant other changes in recent years – including eligibility rules, amounts and particularly the removal of additional, earnings-related components (think SERPS, State Second Pension and so on).  The new State Pension will provide a flat rate level of income for all individual adults – currently £8,500 for those with a full contribution record. The new state pension was created to simplify the whole system but also make it more re-distributive, and to improve affordability. The system is now rolling through and each newly retired person will receive it. Currently this is just over 400,000 people.

NatCen has been working with the Pensions Policy Institute (PPI) to help understand the level of understanding of the new State Pension. The briefing note from PPI shows clearly that understanding is patchy, and this backs up previous research. New data from the NatCen Panel shows that the youngest people, not surprisingly, have the least knowledge. Moreover, it is estimated that three in ten of those approaching retirement don’t know that they will receive a State Pension when they are older than they expect. About one in five young people don’t expect to get a State Pension at all (see Figure 1).

Source: NatCen Panel November Wave 2017. Base: Men aged 18-65, Women aged 18-60. Excludes those would he didn’t know (n=1435).

So it seems the new system has not led to a major shift in understanding (and any resulting behavioural change) yet. This raises two questions – i) does it matter and ii) how can it be improved? There are alternative perspectives on the answer to the first question. If people are becoming eligible and also in a workplace pension, then there are no choices that they are not exercising. However, it will matter to those more at risk, such as those approaching retirement soon, or people with intermittent working or caring histories. (You need 35 years of these to get a full State Pension).

On the second question, there is clearly more consensus for action. There are lots of practical ways for how people could be more engaged in the State Pension. It is already possible to check National Insurance records online but a more sophisticated pensions ‘dashboard’ is on the way. This could have a big impact but only if people know about it and use it. Could targeted e-mail and hard copy communications play a role?  Could the state pension update be provided as part of mid-life career checks (a bit like what is happening with the NHS midlife health check)?

So, it really appears we are at the beginning of a journey where the country starts to appreciate the changes made. As well as supporting individuals’ retirement planning, it will have a significant impact on society  –  the new State Pension acts as a sort of universal basic income for the majority of the older population. This research was intended to help stimulate initial discussion, and there is definitely scope for more regular and deeper insight. Getting people to understand the new State Pension at an individual and societal level would have a lasting positive impact.

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About the Author

Kirby Swales is Director of Survey Research Centre at the National Centre for Social Research.
All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science.

How Cabinet resignations and the Chequers proposal could destabilise the economy

The stability of UK economy is currently at a critical stage now that Theresa May’s leadership may be challenged following high-profile Cabinet resignations, and depending on how the EU reacts to the ‘soft’ Brexit approach agreed at Chequers. Michael Ellington and Costas Milas explain how the pound’s exchange rate and volatility go hand in hand with peaks in policy uncertainty.

The ongoing political turbulence over Brexit two years on has not stopped the UK economy from growing in a fairly robust manner. Indeed, brand-new monthly GDP data released by the ONS for the first time in July 2018 indicate that our economy is growing slightly better than previously thought. Figure 1 plots together annual GDP growth (based on the latest release of quarterly GDP data) and inferred annual growth based on the first-ever release of monthly GDP data.

Source: see here and here.

As can be seen from Figure 1, the monthly data paint a much rosier picture since the EU referendum. All this implies that if the Bank of England’s Monetary Policy Committee (MPC) members decide to trust the brand-new monthly GDP data, it is more likely than not that they will raise the Bank’s policy rate in early August. Unless, of course, Boris Johnson and other pro-Brexit MPs have other ideas about our government’s fate.

In fact, the very resignations of David Davis and Boris Johnson have the potential of destabilising the economy if one (or both) ex-ministers decide to ‘challenge’ Ms May’s leadership. Alternatively, our EU trading partners have the potential to slow down our economic prospects if they decide to challenge the ‘soft’ Brexit approach agreed by our government during the recent Chequers meeting. Indeed, either Boris Johnson or Michel Barnier have the potential of adding to policy uncertainty which, in turn, will trigger a big drop in the pound’s exchange rate and a big rise in the pound’s exchange rate volatility.

Historically, sharp drops in the sterling’s exchange rate and rising exchange rate volatility go hand in hand with peaks in policy uncertainty. This is indeed documented by Figure 2 which plots deviations of UK policy uncertainty (measured by newspaper articles from The Times and The Financial Times discussing economic policy uncertainty) from its 3-year Moving Average together with the annual growth of sterling’s effective exchange rate and the 3-year rolling exchange rate volatility.

Source: £ exchange rate from Bank of England database (code: XUMABK82). 3-year rolling volatility of the exchange rate is computed by the authors based on the exchange rate data. UK policy uncertainty comes from here.

As can be seen from Figure 2, rising policy uncertainty fuels exchange rate volatility and both of these ‘economic ills’ eradicate any economic benefits stemming from the weaker exchange rate. In the presence of rising policy uncertainty and exchange rate volatility, UK exporters will consume themselves into spending considerable time and effort to hedge against exchange rate risk rather than pursuing profitable investments in export-related trade. All this will lead to higher inflation, therefore undermining the ability of consumers to support our economy through additional spending; and slow down investment planning therefore questioning the ability of our economy to grow stronger.

Watch out for the next move of our Conservative Brexiters and the response of EU’s Chief negotiator Michel Barnier to Ms May’s ‘soft’ Brexit approach. In other words, an interest rate rise in August is far from a done deal and very much dependent on our internal politics as well as the response of EU policymakers to our government’s Brexit proposals.

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About the Authors

Michael Ellington is Lecturer in Finance at the University of Liverpool.

 

 

 

Costas Milas is Professor of Finance at the University of Liverpool.

 

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Pixabay (Public Domain).

 

Barriers to digital diplomacy: why are governments slow in adopting technology?

While the use of e-diplomacy is gaining momentum, there are certain factors that hamper its implementation by governments, and by foreign ministries in particular. Uthayasankar Sivarajah and Vishanth Weerakkody explain what these factors are, and why diplomats need to embrace digital diplomacy now if they are to reap its benefits.

There is no doubt that technology has penetrated all aspects of government and has become an indispensable tool for public services to operate in an open and auditable way. With the advent of digital government, key public ministries have used new-emerging technology to reduce the complexity and cost of operations and improve citizens’ engagement in the democratic process. But the use of technology in foreign ministries has been largely focused on internal operations and questions remain as to whether diplomats are missing a trick by not using digital platforms to further international diplomacy.

Encouragingly, in recent years the concept of e-diplomacy has slowly started to challenge and replace traditional methods of diplomacy to support the multiple functions of diplomats. As demonstrated recently in multiple political contexts (i.e. in the case of presidential elections in the US, the EU referendum in the UK) e-diplomacy could transform the way nations deal with each other in important political, bi-lateral trade and policy issues. For example, confrontational messages and praises by politicians via Twitter are a common trend, generating a worldwide audience because of social media’s global nature.

Yet, our research shows a remarkable reluctance on the part of diplomats to fully engage in the use of digital tools, and diplomacy still continues to go on behind closed doors, hidden from citizens. This leaves several important questions unanswered, including: do the ways of diplomacy reflect society; does the current generation of diplomats understand how to use technology effectively; and are security concerns simply too great to overcome in this area? Recent events show that, while in the longer term, the answers to these questions do matter when it comes to the speed and level of e-diplomacy adoption, the nature and impact of regional and word politics can accelerate the process significantly.

Our research at the US State Department, the UK’s Foreign and Commonwealth Office, and Qatar’s Ministry of Foreign Affairs showed that there is much appetite for using digital communication tools such as Twitter, Facebook, Video Messaging, and Blogs. Although staff and diplomats in foreign missions have been using email and social media for several years, these efforts have been very measured and sometimes constrained within virtual private networks due to fear of security and confidentiality breaches. As such, risk avoidance and resistance to change have impeded the widespread adoption of e-diplomacy and prevented foreign missions from keeping pace with the advancement of digital technologies compared to other government institutions and services such as health, education, and transport.

Interviews with senior diplomats, strategists, operational level and IT staff in the three institutions identified 18 interconnected factors that challenged the adoption of digital tools. Using Interpretative Structural Modelling, a methodology that combines qualitative and quantitative techniques, we modelled these interrelated factors identifying the causal effect of each factor on others and how these relationships influence the adoption and diffusion of e-diplomacy tools. The results of this exercise show that a key motivator for governments was to engage with more stakeholders both within and outside their own countries. Key factors that hindered e-diplomacy were red tape and bureaucracy, lengthy decision-making processes and inherent socio-cultural practices associated with the role of diplomacy. One senior US embassy staff in London noted: “If we want to implement an ICT project here in London, we have to seek permission from the home office…. bureaucracy can definitely slow down e-diplomacy implementation”.

‘Digital divide’ created by a culture of resisting change was highlighted by staff in all three institutions as a key barrier to e-diplomacy. One official commented: “Traditional diplomats oppose ICT such as social media in diplomacy because it encourages two-way communication with the public, which is against the norms of diplomacy.” Security fears such as data loss and unauthorised access to data was another major obstacle. Another official stated: “There are concerns about maintaining confidentiality and privacy, which are vital to allow diplomats to maintain respect and dignity in their roles,” He went on to explain that in western democracies, “…this could be the greatest single obstacle to implementing e-diplomacy.”

Based on these findings, we can conclude that digital diplomacy or e-diplomacy is slowly gaining momentum. Traditional diplomacy methods will remain, but the role of digital diplomacy is to complement existing methods and allow countries to contact and communicate with each other, share information, and also influence each other through using digital technology. Governments need to embrace digital diplomacy now if they are to reap its benefits and promote transparency, accountability, and increased interaction between countries.

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Note: the above draws on the authors’ article in Government Information Quarterly.

About the Authors

Uthayasankar Sivarajah is Reader in Technology Management and Circular Economy in the School of Management at the University of Bradford.

 

 

Vishanth Weerakkody is Professor in the School of Management at the University of Bradford.

 

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Pixabay (Public Domain).

Rebuilding a thriving London: How the Blitz enhanced the capital’s economy

In order to rebuild itself after the devastating attacks of the Luftwaffe during 1940 and 1941, London adopted a more flexible planning regime, leading to an extremely positive and lasting effect on the capital’s present day economy, explain Gerard Dericks and Hans Koster.

The Blitz lasted from Sept 1940 to May 1941, during which the Luftwaffe dropped 18,291 tons of high explosives and countless incendiaries across Greater London. Although these attacks have now largely faded from living memory, our research shows that the impact of the Blitz remains evident to this day in both London’s physical landscape and economy.

Using recently digitised UK National Archive records on the locations of all bombs dropped during the Blitz (see Figure 1), we compare the locations of Blitz bomb strikes with local differences in London’s modern-day building heights, employment levels, and office rental prices. After controlling for the concentration of bombs in the centre of London, we find that areas that were more heavily bombed now have more permissive development restrictions due to the fact that fewer historic buildings in such areas survived. Consequently, these areas also have built more office space and have higher worker densities today.

Figure 1. Blitz bomb density

Consistent with considerable empirical evidence from other cities, the consequence of this higher worker density in London has been greater worker productivity (which we proxy with office rent levels). What is new about this research, however, is the magnitude of measured effects. Whereas previous research has primarily sampled secondary cities and has generally found that a doubling in worker density raises productivity by only about 5% (as measured by wages), even after extensive sensitivity tests our paper shows an increase in London’s office rents of 25%. We argue that this difference is largely due to London’s unique position as perhaps the world’s foremost financial and commercial centre, and the exceptional productivity and innovativeness of its resident population. Therefore, the benefits of greater worker density in London are likely to be exceptionally large.

City planners are tasked with controlling real estate development in order to mitigate negative externalities arising from incompatible land uses and costs of congestion such as traffic. However, these restrictions (especially building height limits) entail various costs, for example, higher property prices and greater price volatility. But equally significant is the fact that constraining worker density damages the productivity of the economy. For many historical reasons, London has one of the most restrictive planning regimes in the developed world. For instance, the average height of office buildings in its primary financial district (the City of London) is still only eight floors – still reminiscent of bygone days before the advent of steel building frames and lifts. Based on back-of-the-envelope calculations, we estimate that the value of the Blitz to London in reducing the restrictiveness of its current planning regime and permitting higher densities is £4.5 billion annually, equivalent to 1.2% of London’s GDP.

Ideally, planners would calibrate the stringency of development controls to ensure that society makes the best trade-off between the costs and benefits of greater worker densities. However, in order to make this judgement, planners require accurate information on both these costs and benefits. What our research now shows is that for the case of London, and perhaps other global cities such as New York and Tokyo, the benefits of greater worker density appear to be much larger than anyone had previously surmised. Consequently, if welfare maximisation is indeed city-planners’ primary goal, then, at least in those cities, planners should now be reviewing the stringency of their height restrictions and new development controls more generally.

Spurred on by the critical and commercial success of trophy architect Norman Foster’s ‘Gherkin’ in 2004, London’s planners have however become increasingly willing to approve taller structures. Only a few short years ago London possessed just several dozen buildings it defined as ‘tall’ (with more than 20 floors), but planners have since approved a total of 510 such buildings, 115 of which are presently under construction. While some might blanch at this rush of tall buildings, research shows that even the tallest buildings currently in London’s pipeline are still only a fraction of the size that would be necessary to equate supply with demand. Therefore, as much as London’s skyline has expanded in recent years, there is still considerable scope for increasing building heights and economic welfare across the city.

The Blitz was a tragic episode in London’s history, the likes of which one only hopes will never be repeated. However, by locally relaxing the restrictive planning regime put in place after the war, for all its human cost, the Blitz has subsequently had an extremely positive effect on London’s present day economy. Moreover, this lasting influence has now provided us with unique insights into the very human drivers of urban economics, and spotlights the exceptional dynamism of this enduring city.

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Note: the above was originally published on LSE Business Review and is on the authors’ discussion paper for the LSE’s Centre for Economic Performance.

About the Authors

Gerard Dericks is senior lecturer in real estate economics and finance at Oxford Brookes University. He has industry experience as an analyst with Property Market Analysis LLP and research consultant with Policy Exchange. He was also a contributor to the winning submission for the 2014 Wolfson Economics Prize.

 

Hans Koster is an associate professor at Vrije Universiteit Amsterdam’s department of spatial economics. Hans is also a leading research fellow at the Higher School of Economics in St. Petersburg, a research fellow with the Tinbergen Institute, a research associate with LSE’s Centre for Economic Performance’s urban programme, and a research affiliate with the Centre for Economic Policy Research (CEPR).

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Photo HU 36157, Imperial War Museums (Wikimedia Commons).

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