Economic decisions, social impact

Social impact header

by Kim

This week, the Hub sent representatives to two very informative economic strategy events at Nesta at the RSA that discussed the social impact of the economy and investments.

On Monday at “Is bad judgement a good thing?”, a joint event hosted by Nesta and UCL, delegates congregated to question Dr W.H. Janeway on his theories regarding bad judgement leading to good innovation.

On Tuesday, the Hub attended the RSA’s launch of its final report from the Inclusive Growth Commission, where a panel made up of collaborating organisations took questions on the aims and contents of this publication.

Bad judgement, good results?

Dr Janeway, Managing Director at Warburg Pincus, had several interesting points to make, including a comparison between the effects of two recent “bubbles” on the economic and social landscape – the “dotcom” phenomenon of the late 1990s, and the subprime mortgage investment chain that led to the 2008 crash.

The “dotcom” phenomenon, Dr Janeway said, was a result of bad judgement resulting in no lasting effect on the global economy. Investors were using capital markets – in this case, money that only existed digitally – to invest in quick projects that didn’t last. As a result, the economic dip suffered after the bubble “burst” was short and almost negligible.

He contrasted this with the subprime mortgage practices that led to the 2008 crash. Here, banks were using “real” money invested by customers to support mortgages that were likely to be foreclosed. When this bubbles popped, the effects were so great that they are still being felt today.

Investment economics: the social impact

Dr Janeway also made the point that impact investment is becoming increasingly important as investors and institutions take both the economic and social impact of the investments being made into account.

This investment can take many forms. The Industrial Strategy green paper, published by Government last month, takes account of the need for investment to deliver agility, commercialisation and competitiveness; focusing funds on various interventions, whether (in the context of science, research and innovation) uplifting STEM skills, supporting commercialisation or investing in local science, can draw together to deliver a more coherent impact than could otherwise be achieved, according to social and economic metrics.

The need for local

Institutions are currently the real drivers of economic investment on a regulatory, economic, and social scale. Dr Janeway said that the right institutions and/or actors are needed to respond to the right situations. This is especially prevalent given the decreasing availability of funding streams.

While Dr Janeway spoke directly to the role of investors in this context, the fact that there need to be more people “acting on the ground” is a central part of what the Smart Specialisation Hub aims to promote.

The tenth pillar of the Industrial Strategy – ‘creating the right institutions to bring together people and places’ – speaks directly to this need, and to the Hub’s opportunity to act. Working with local areas to empower clusters affords us an opportunity to impartially inform decision-making through a two-way lens, with Government and local actors at each end of the process. The Hub is well-placed to triangulate inputs from all relevant organisations, convene, inform and validate, and add its own distinctive value.

Whilst this event focused more on the global and national point of view, the points made can easily be applied to drilled-down, more local markets. Elements such as available capital versus the risks, the certainty of investment (and the lack of available funding for these investments), the role of local actors in investment, and social impact are all important aspects of the Hub’s work.

The need for social

Social impact was also a key theme for RSA’s final launch for their Inclusive Growth Report, which the Hub attended on Tuesday.

The report focuses on how inclusive growth is not only about economic growth, but also social growth – it requires combining social and economic policy. Moving towards social inclusion was seen to encompass investing in people (talent), skills, education and job creation.

A panel led by Stephanie Flanders, Chair for the Inclusive Growth Commission, made the point that inclusive growth is not only about economic growth, but also social growth. It requires combining social and economic policy. Moving towards social inclusion was seen to encompass investing in people, skills, education, and job creation.

The panel went further and said that businesses and SMEs can be part of inclusive growth by encouraging employers to invest in their employees – including skills development – and investing in ‘human assets’ more broadly.

Socially-aware growth

Inclusive, socially aware growth can be underpinned through pillars articulated in the Strategy. For example, a commitment to delivering affordable energy and clean growth through exploration of emerging sectors can deliver broad-ranging benefits which resonate commercially and socially. Likewise, a commitment to driving growth across the whole country – articulated, for example, through working with localities on their skills needs – must by necessity deliver on the requirements of disadvantaged areas and ensure the economic uplift that will support the needs of those areas left behind.

Both these events pointed toward many areas in the current economic climate where the Smart Specialisation Hub is aiming to work with actors on a local and national level. The Hub team look forward to incorporating what was learned at these events in future work. We would also like to thank the RSA and Nesta/UCL for hosting these two very informative sessions.

We’d like to meet you!

If you are interested in having us attend your upcoming event and/or speaking to you directly, please get in touch.

About the author

Kim is the Digital Communications Officer for the Smart Specialisation Hub.

Leave a Reply