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Danny Kruger

Danny Kruger: We should regard deprived communities as mini-economies, and attempt to kick-start them as we do developing nations

Why don’t we take a new approach to deprived communities, and treat them like we do deprived countries? They are similar: demographic imbalance (too many under 18s), tiny private sector share of the economy, inadequate banking systems, poor infrastructure, and of course chronic budget deficits (welfare transfers as the equivalent of foreign aid).

Treating poor neighbourhoods like poor nations has two positive implications. It means we treat them with some honour – not as basket cases to be forever propped up with welfare spending, but as potentially independent communities, capable of self-government and self-sustenance. And it means we don’t have to treat every neighbourhood the same, but can tailor a policy approach to local circumstances.

The idea isn’t mine but Stephen Brien’s, now an adviser to Iain Duncan Smith in the DWP and formerly at the Centre for Social Justice. He points out that much of the thinking around social renewal has focused on individuals and households, whereas a salient characteristic of entrenched poverty is its connectedness: everyone you know is poor. We should regard these communities as mini economies in their own right, and attempt to kickstart them in a way we do (or should) developing nations.

Free market monomaniacs, like Ian Birrell of this parish, would object that the last thing inner city Britain needs is a domestic version of DfID and the World Bank, and they’re right. A "development" approach to the broken society would focus on wealth creation, not transfers, with radical cuts to taxation and business regulation in these areas, and real incentives for investment both internally (from local people) and from "abroad".

The cultic Peruvian economist Hernando de Soto has shown how much "dead capital" is locked up in the slums and shanty towns of the world’s poorest nations. The poor, he argues, already have assets worth far more than all the foreign aid ever spent, but they cannot be leveraged for growth because the governments don’t formally title the land, and the banks don’t lend against untitled property.

Our problem is not the lack of titles but the fact that government (or the local council) holds so many of them itself. A large scale asset transfer from state to society – plus carrots and sticks to make the banks serve these communities – would liberate the latent energies of the neighbourhood, stimulating a renaissance in local activism and business creation as well as the political skills needed to run a community. Leadership capital, as well as the economic sort, is languishing on a council estate near you. 


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