In his diagnosis of why Britain has nearly a million 16-to-24-year-olds not in education, employment or training, Alan Milburn arrived at a stark conclusion: “No amount of reform to individual policy areas or institutions alone will fix this. The architecture itself is the problem” – fragmented systems across education, employment, health and welfare that were never designed to ensure young people can meaningfully participate in the economy.

Unfortunately for the UK, that architectural failure is not unique to the Neet crisis. As Vicky Spratt vividly illustrates in her work on Generation Screwed, even the people who have seemingly done everything right are still being failed by the system. Homeownership that’s priced out of reach, compounding student debt, extortionate childcare costs and suppressed wages mean the once-thriving professional class is now experiencing downward economic mobility, leading many to delay parenthood, move back home or, in some cases, leave the country altogether.

What Britain is experiencing is not the inevitable consequence of low productivity or leaving the European Union but the collapse of the country’s participation infrastructure: the full stack of economic architecture that determines how people participate in the economy. While decades of policy have optimised for market efficiency and fiscal discipline, the architecture that matters most for people to contribute has been left to erode. The result is a generation being locked out, people working harder for less and an economy falling behind its peers.

Unlike his predecessors, Andy Burnham understands the challenge that lies before him. His commitments since taking office already point in the right direction: good growth in every postcode, investing in people’s success rather than paying for failure, parity between technical and academic education, and no dead ends so that young people don’t fall through the cracks. But what his agenda still lacks is a framework for building coherently across the entire participation stack that speaks both to markets and to a public increasingly convinced the economy is “broken by design”.

Beyond public control

In his first party conference speech as prime minister, Burnham said his theory of growth starts with taking back public control over the essentials of living. It’s an approach he honed in Greater Manchester, where local control over the city’s buses lowered costs and improved service delivery. Drawing on Mathew Lawrence’s Productive State framework, he plans to scale that approach nationally by lifting the ban on public ownership of water, establishing the Great British Grid to get energy costs back under control and embarking on the biggest council homebuilding programme since the post-war era.

But if public control is the starting point, then what comes next? For Burnham, the answer is to devolve power to the local level so places are empowered to create the optimal conditions for businesses to thrive while giving people the support they need to be employed by those businesses. It’s a sound theory of growth, but while Burnham has a detailed blueprint for public control and devolution, he has yet to articulate the equivalent for investing in people’s success. That’s where participation infrastructure comes in, both as a framework for completing his theory of growth and as an organising logic that would make his agenda greater than the sum of its parts.

Participation infrastructure consists of three interdependent layers: assets, access and agency. Assets are where the Productive State operates – the essentials of living that make participation possible in the first place, from housing and healthcare to transport and digital infrastructure. Without these, little else matters. Access refers to the pathways that sit on top of that foundation – the education, skills and credentials that lead to opportunity, as well as the discoverability of those pathways: are people aware of all the options available to them? And agency is what empowers people to move through the economy on their own terms. Subsidised childcare, entrepreneurship support and retraining entitlements are all examples of institutional mechanisms that expand people’s capacity to take risks or change direction, while democratic processes like worker representation give people the collective power to shape participation itself.

When Burnham says the UK has made some “wrong turns” over the last 40 years, that includes not just the centralisation and privatisation of power but also the dismantling of the country’s participation infrastructure. Starting with its assets, roughly 2.8 million social homes have been sold off since Right to Buy started in 1980, while the political will to supply more has repeatedly fallen short. This has fuelled a housing crisis that constrains economic mobility, limiting people’s ability to move near quality jobs while putting homeownership out of reach for much of a generation. Similar patterns have played out across transport and healthcare. In the decades after bus deregulation in 1986, usage outside London fell by 32.5% while rising 99% in the capital – the only place in England that maintained public control. More recently, the NHS waiting list has nearly tripled since 2010, a period in which health spending was severely constrained prior to the pandemic. To make matters worse, long-term health issues are now the leading cause of economic inactivity among working-age adults.

The less visible story is what Britain has done to its access layer. According to a 2024 report from the International Monetary Fund, “the UK workforce has larger and more chronic skills gaps than in most peer countries”, predating both Brexit and the pandemic. Much like the country’s assets, this didn’t happen by accident. Public spending on adult skills has dropped by 30% over the last two decades, with the steepest cuts coming after the financial crisis. Adult learner numbers have fallen sharply as a result, particularly in England’s most disadvantaged communities. The picture is even starker for young people. Since the Apprenticeship Levy was introduced in 2017, participation for under-25s has declined by around 35%. Because employers have increasingly used the levy to upskill existing employees who already hold degrees, Milburn argues “the entry-level provision that matters most for young people outside work has been hollowed out”.

Meanwhile, the academic route that Britain has increasingly told young people to take now comes with a hefty price tag that directly undermines their agency. From 1962 to 1998, university was tuition-free, with maintenance grants to help cover the cost of living. Students in England now graduate with an average debt of around £50,000, effectively taxing participation before it has even begun. Another example of agency architecture being stripped away is the closure of more than 1,300 Sure Start Children’s Centres, which integrated childcare, early education and employment support for families with children under five. The Institute for Fiscal Studies found that Sure Start delivered benefits worth twice its up-front cost by reducing the need for public services, increasing lifetime earnings and generating higher tax revenue from those earnings. At the same time, the collective side of agency has fared no better. Since Margaret Thatcher came to power in 1979, union membership has been cut in half, with only a quarter of British workers covered by collective bargaining agreements.

Taken together, these were not separate policy decisions but the unravelling of the same architecture, one component at a time. Each cut was made in isolation across siloed policy areas with their own mandates, their own budgets and their own definitions of what good looks like. This is what happens when a country lacks both the organising logic needed to treat participation as the product of a single system and the understanding that participation infrastructure is not discretionary welfare spending but capital investment in the productive capacity that makes economies grow.

More than just buses

While the UK was taking apart its participation infrastructure, Burnham was quietly building across all three layers in Greater Manchester, even if he didn’t have the framework to articulate it. For all the praise that gets showered on the Bee Network, his most consequential achievement was shifting the city region’s growth model away from deregulated private capital and towards broad-based investment in people’s capacity to participate.

Although the economy he inherited back in 2017 was already growing, it was largely driven by decades of the very neoliberalism Burnham rails against – private investment in the city centre at the expense of nearly everything else. Predictably, Greater Manchester’s growth has mirrored the wider trajectory of the UK: highly unequal and heavily concentrated in the core while the outer boroughs have lagged behind.

It wasn’t until 2023 that Burnham’s own vision for Greater Manchester started to become reality. That was the year the Trailblazer devolution deal gave him unprecedented power over education, housing and transport, alongside finally being able to bring the city’s buses back under public control. Within a year, he had introduced the pioneering MBacc technical education pathway, pledged 10,000 new council homes and set up the GM Rail Board to integrate commuter trains with the Bee Network.

Then, in 2025, the landmark Integrated Settlement arrived, putting an end to Whitehall’s siloed funding pots and allowing Burnham to organise his economic project as one cohesive programme. The Good Growth Fund – a nearly £2 billion investment vehicle blending the settlement funding with pension capital and a £500 million partnership with the National Wealth Fund – is what emerged from that coherence.

Unlike Greater Manchester’s neoliberal era, the GGF deliberately spreads investment across all 10 boroughs, building affordable housing next to reliable transport links, expanding employment spaces and revitalising the high streets that serve those communities. Crucially, developers and businesses who take the fund’s money must create apprenticeships and T-Level placements, directly complementing the MBacc pathway and the city region’s £114 million investment in adult skills programmes.

Alongside the GGF, Greater Manchester has developed innovative services like EnterprisingYou and Build a Business to support entrepreneurs, while the WorkWell scheme provides anyone 16 or older with a work and health coach to help them overcome barriers to employment. Underpinning all of this is Greater Manchester’s Good Employment Charter, Burnham’s own voluntary scheme for higher workplace standards and a real living wage, which is now required as part of the GGF and covers over 800,000 workers across the city region.

The question isn’t whether Burnham knows how to build participation infrastructure but whether he can do it at the level the national scale demands. His plan to devolve similar powers to every region by 2028 while helping local leaders set up good growth funds of their own is a step in the right direction. But absent a shared account of what to build with that power, you get twenty different answers to what good growth looks like. Aside from the real delivery challenges of varying capacity and capability across regions, Burnham will still need cohesive national architecture if he wants devolution to translate into shared prosperity.

What good looks like

When it comes to robust participation infrastructure with national coherence, Europe’s two most competitive economies offer a useful precedent – not just for what to build but how to design it. Switzerland and Denmark have both topped the IMD World Competitiveness Ranking in recent years while the UK has languished in the mid-to-high twenties.

Both countries excel in an area Burnham has already made a priority: parity between technical and academic education. But parity alone is not enough. What sets Switzerland’s model apart is its interoperability. Not two parallel tracks of unequal standing, but fluid movement between them. Two-thirds of Swiss school leavers go down the Vocational Education and Training (VET) route, involving a multi-year apprenticeship with around 250 occupations to choose from. Apprentices can then move into an applied university that blends teaching and practice, continue on to advanced vocational colleges or simply skip higher education altogether. While VET graduates can still enter a traditional university, their peers on the academic track can also move the other way, provided they complete a year of work experience supported by structured pathways into internships and work-study programmes. What makes the Swiss model even more elegant is that those routes stay open, with 12% of upper secondary qualifications each year awarded to people aged 25 or over.

That is one of the gaps in Burnham’s agenda: so far it is heavily weighted towards young people without necessarily embracing the principle of continuity. A technical pathway from age 14 is a real advance, but what about the 45-year-old whose job has just been automated by AI? This is where Denmark offers a useful lesson. Much like the UK today, the country made some wrong turns in the 1970s and 80s. By 1993, it was facing a severe unemployment crisis of around 12% and its debt-to-GDP ratio had hit an all-time high. Instead of more austerity, the government introduced Flexicurity: freedom for employers to hire and fire as needed, backed by generous, time-bound unemployment insurance. But what makes it work, alongside robust collective bargaining, is a comprehensive suite of state-funded training programmes, career coaches and job-matching services that give everyone a high-quality on-ramp to their next opportunity. Rather than a safety net for people who “fail”, Flexicurity is universal architecture that enables people to continuously participate whether they’re a construction worker or a biomedical researcher. In addition to leading the EU in AI adoption, Denmark now has a debt-to-GDP ratio of only 28%, having run consecutive fiscal surpluses for much of the last decade while nearly tripling its defence spending to more than 3% of GDP.

This is why universality is so important. Unless everyone can use the architecture, it becomes exclusionary by design, capping its transformative potential. Nowhere is that more true than in England’s social care system. Unlike the NHS, it is not free at the point of use. Anyone with assets above £23,250 pays for everything themselves. According to Carers UK, over a million people have left work due to caring responsibilities over the last two years, with an estimated 6.7 million balancing employment with unpaid care. Burnham’s plan for a National Care Service might seem like good social policy, but it’s also participation infrastructure in all but name. Every person released from caring responsibilities is someone who can re-enter the economy, a family member who can invest in their career, a potential entrepreneur who finally has the bandwidth to start a business. The architecture creates a cascade of participation that a means-tested system simply cannot – including dignified employment pathways for the care workers themselves.

Which brings us to the final principle of good participation infrastructure: plurality. A system can be interoperable, continuous and universal, but still channel everyone towards the same narrow set of destinations. As Justine Greening, the former Conservative education secretary, said in response to Burnham’s parity push, “There’s a third route we need that isn’t vocational, isn’t academic, which is entrepreneurship… There is still no pathway for somebody who has an amazing idea and wants to get on with it”. That’s exactly the gap Innovation Fund Denmark is designed to fill – de-risking entrepreneurship at every level, from 12-month programmes that include financial support and mentorship to large-scale partnerships aimed at addressing society’s toughest challenges. Participation infrastructure isn’t only about unlocking existing capacity; it’s about expanding what the economy can become. The best architecture enables diverse forms of participation to emerge, while directing activity towards what society needs most, whether that’s climate adaptation or mental health provision.

Without these principles, you can build assets that don’t connect, access that’s uneven or agency that never materialises. This is particularly important as Burnham devolves power to the local level. Switzerland solves for this by setting its vocational education framework nationally, and leaving delivery to its 26 cantons. Each one has its own VET agency with its own employer relationships, and industry associations define what the training contains rather than merely advising on it. The result is a system that is genuinely local while being nationally coherent. That’s the approach Burnham needs to bring to the UK, applied not just to vocational education but to the entire participation stack.

The case for investment

According to Andy Haldane, former chief economist at the Bank of England, one of the biggest risks to the Burnham project is that markets are already starting to see his premiership as a “traditional tax and spend socialist government with better TikTok videos”. That’s the same Andy Haldane who, earlier this year, praised the Good Growth Fund as a “fantastically innovative” model for spurring growth outside the South East.

To counter that narrative, Burnham needs to demonstrate that his agenda is categorically different. Not tax and spend, but capital investment in the country’s participation infrastructure. Milburn has already made the fiscal case in his review of the Neet crisis: for every £1 spent helping young people into work, Britain spends £25 paying for their benefits. One of those pays for itself through a stronger tax base and economic growth while the other pays for the failure to make that investment in the first place – a failure that he estimates costs the UK £125 billion a year. That’s more than the entire education budget and nearly double what currently gets spent on defence. The challenge for Burnham is whether he can shift that spending from managing decline to expanding what’s possible.

Pulling that off is less about getting the maths right than it is about articulating a narrative that survives both market scrutiny and public scepticism. The good news for Burnham is that Britons are already halfway there. As Anoosh Chakelian has documented, people have shifted in recent years from seeing the economy as a naturally occurring phenomenon outside the government’s control to believing in a “designed economy” actively shaped by policies and political priorities. What’s been missing is the language for what a designed economy should actually consist of. Participation infrastructure fills that gap. Not only as a design specification, but as an investment logic and a vocabulary for change.

When Andy Burnham left Cambridge in 1991 and returned to Liverpool, he found himself in a position familiar to many today: unable to find a quality job in the place he calls home. Forced to move to London, he says he felt like a failure. Decades later, he now has the power to change that story for millions of Britons. His ten-year plan represents an opportunity for the government to operate on a time horizon long enough to actually build a system that works. That means not just undoing four decades of wrong turns, but deliberately investing in the architecture that will define Britain’s economy for the next 40 years.

What follows is a written version of that talk. Most of it is the argument as I gave it. The parts tailored to UNDP’s own work are summarized more briefly toward the end. It also marks the first time I’ve put into writing a second idea I introduced that day: Economic User Experience (EUX), a way of evaluating whether participation infrastructure actually works for the people navigating it.

You can find the full session embedded at the end of this post. All illustrations adapted from work by Jozef Mičic.

The myth of effort

One of the most harmful myths in economic thinking is that if people just work hard, opportunity will follow.

Yet the numbers tell a different story. According to the International Labour Organization, 402 million people around the world want work but can’t access it. More than 2 billion who do have jobs are stuck in informal employment without basic protections. It’s not just that people can’t find work. They’re navigating fragmented architecture that never gives them a coherent pathway into meaningful economic participation.

When we think about employment, it’s usually as individuals navigating a labor market, rather than looking at the infrastructure that shapes participation. As a result, most policy interventions focus on only one part of the system. Workforce development aligns skills with demand. Human capital investment increases worker productivity. Active labor market policies try to better match talent with opportunity. Even when these are integrated alongside wraparound services, it tends to happen at the project level rather than delivering structural change.

Meanwhile, the investments that do make a difference are often the first to go when budgets tighten. In the decade after the 2008 financial crisis, the UK, for example, closed more than a thousand Sure Start children’s centers, cut spending on affordable housing and ended the Education Maintenance Allowance in England, which helped hundreds of thousands of young people stay in school.

Participation Infrastructure

Participation infrastructure offers a fundamentally different way of viewing the economy. Rather than looking only at jobs or skills, it encompasses the entire stack of social and physical architecture that determines how people participate in the economy. It consists of three interdependent layers:

Assets: the material foundations that make participation possible in the first place. This includes housing, healthcare and transportation, but also the physical spaces where economic activity happens, from co-working hubs to research labs. Without these, nothing else matters. A person can’t show up to work without reliable transport, nor can they attend a virtual interview without Wi-Fi.

Access: the systems and mechanisms that open doors to opportunity. Someone might be healthy and able to show up to an office building, but without the right knowledge, skills or credentials, that door remains shut. Crucially, Access also includes discoverability. For too many people, the problem isn’t that the door is closed. It’s that no one ever told them it was there in the first place.

Agency: the institutional support that expands people’s capacity to choose how they contribute. A single parent with childcare responsibilities, student debt and a stack of medical bills has far less economic agency than a healthy graduate living at home. Subsidized childcare, retraining credits and entrepreneurship support all remove barriers and encourage people to take risks and invest in their futures. Agency also includes the collective power to shape participation itself, through worker representation and political engagement.

As I wrote in the introductory essay, “If Assets lay the foundation and Access opens the door, Agency is what allows a person to walk through it on their own terms.”

Singapore’s seamless economic experience

To understand the transformative potential of participation infrastructure, it helps to look at where it exists in its most complete form.

When Singapore became independent in 1965, nearly 70% of people lived in squatter settlements, many couldn’t read or write, and unemployment was in the double digits. Within a lifetime, it became one of the richest countries in the world.

Singapore is often described as a unicorn due to its unique geography and political context. But as a small nation with no natural resources, the country under Lee Kuan Yew understood that its most valuable resource was its people. His primary preoccupation, as he put it, was “to give every citizen a stake in the country and its future.” Rather than competing for investment on cheap labor, Singapore made participation infrastructure the foundation of its economic strategy.

That began with housing. The Housing & Development Board, founded in 1960, rapidly built public homes for Singaporeans. Today, roughly three in four residents live in HDB flats, and around 90% of households own their home.

But Singapore has built far more than housing. Its Assets layer isn’t just checking boxes. It’s a strategically integrated ecosystem of housing, healthcare and transport. Homes are planned around the rail network, and by the early 2030s eight in ten households will live within a ten-minute walk of a train station. Similarly, neighborhood polyclinics put quality care within reach of almost everyone. Singapore was also one of the first countries to roll out nationwide broadband, putting it among the most digitally connected economies globally.

Its Access layer is also one of the strongest in the world. Mandatory bilingual education equips every citizen to participate both at home and abroad. A robust network of polytechnics and ITE colleges means university isn’t the only pathway into a dignified career, giving the country a dependable pool of engineers, technicians and skilled tradespeople. And at the top of the stack, A*STAR’s research PhD pathways train the scientists and innovators designed to power the next wave of growth.

Finally, its Agency layer is where things really get interesting. The Central Provident Fund isn’t just a retirement account. It’s a mandatory savings vehicle that funds the major investments people make throughout their lives, from education to buying a home to supporting their own retirement. Alongside it sits the 3M healthcare financing architecture: MediSave (mandatory healthcare savings), MediShield Life (universal insurance) and MediFund (a safety net, so no one has to go into debt to cover medical bills). On top of those financial vehicles, things like the Baby Bonus give parents cash gifts and matched savings for their children in addition to heavily subsidized childcare. And SkillsFuture credits help workers retrain for emerging industries as technology and automation change what work gets valued.

As a result, very few Singaporeans experience the transaction costs and debt burdens that limit economic participation for many of their counterparts across the world. Put together, Singapore has built what could be called a seamless economic experience. From birth to retirement, barriers to participation have been removed at nearly every stage.

Children are born into a stable foundation of housing, healthcare and bilingual education. Diverse and affordable training pathways aligned with industry needs mean people have meaningful routes to choose from. And once people have entered the workforce, their savings and career progression are able to compound free from debt. Lifelong learning keeps people contributing as the economy evolves, and dignified retirement is made possible by the wealth that’s been accumulated from a lifetime of participation.

This is what happens when a country builds participation infrastructure intentionally from the start. Not as social spending but as core economic architecture designed around people’s capacity to participate in the economy.

From human error to system error

Yet that seamless economic experience doesn’t extend to everyone. Foreign workers make up nearly two in five members of the workforce, and more than 1.2 million hold Work Permits, concentrated in construction, manufacturing and domestic work. They are formally employed, documented and taxed. But the participation infrastructure they navigate looks completely different.

Even The Straits Times has asked why Singapore accepts conditions for migrant workers that its own citizens would never tolerate. Many arrive already in debt from recruitment fees. Their permit is tied to their employer, restricting their mobility. They live in isolated dormitories, with restricted access to healthcare and few pathways to credentials that would let them progress. It’s a humbling reminder of how participation infrastructure gets built, and who it gets built for.

And when a system isn’t built for someone, we have a tendency to blame them when things go wrong.

Don Norman, the cognitive scientist who gave us the term “user experience,” has spent his career showing why that instinct is almost always mistaken. In The Design of Everyday Things, he argues that human error is usually the result of poor design, and that really “it should be called system error.”

Applying that same lens to the entire economic system is how we operationalize participation infrastructure and evaluate whether it’s actually working for the people it’s meant to serve. That’s what I call the Economic User Experience. Rather than asking whether people are trying hard enough, it asks questions of the system itself:

• What is the end-to-end journey of someone navigating the economy?

• Where do people experience friction or drop out of the system altogether?

• Does the system punish people for mistakes or help them recover?

• Is the system designed for all users or only a select few?

Asking these questions lets us not only diagnose where the economy is broken, but also design the architecture that makes it genuinely work for everyone.

Why this matters for UNDP

For the UNDP audience, I connected the framework to two shifts already underway in its own work. Its move from fragmented projects to portfolios grounded in systems thinking enables this kind of human-centered design. UNDP has also recently introduced the concept of the Transformation Stack: the institutional capacity for delivering long-term systems change, from dynamic capabilities to system finance.

If the transformation stack is the institutional DNA needed for change, then participation infrastructure is what that capacity should be directed toward. And the economic user experience is how we evaluate that architecture based on the lived experience of people actually navigating the economy rather than aggregate measures.

For an organization working across more than 170 countries, that combination matters. Country teams are already grappling on the ground with the fragmented architecture this framework describes, from informal labor markets to returnees with no clear pathway back into work. Participation infrastructure gives them a way to see those challenges as a single system, and to design interventions that work across all three layers rather than one at a time.

Just as importantly, it helps make the case for investment both internally and with governments. Much of what makes up participation infrastructure is still treated as discretionary social spending, defended program by program. Naming it allows us to see it for what it actually is: investment in the productive capacity that makes economies grow. That’s the difference between a project that gets funded once and a system built to last.

You can watch the full session below. If you’re working on any of this, whether in government, development or on the ground, I’d love to hear from you.

In what is known as the American Rust Belt, working-age adults are more likely to die young from what economists Anne Case and Angus Deaton refer to as deaths of despair: suicide, opioid abuse and alcoholism closely linked to the loss of purpose and community that tends to accompany economic displacement. Only former Soviet states transitioning from communism in the 1990s have experienced the level of social collapse that millions of Americans have suffered over the last few decades. 

Yet, with the emergence of AI, we find ourselves once again on the brink of another economic disruption — one that threatens to displace workers at even greater speed and scale — and somehow almost no one seems to know what we’re going to do about it. 

This was on full display back in April when New York Magazine asked five political insiders whether anyone in Congress has a plan for AI job losses. The responses were remarkably thin. Josh Hawley proposed better tracking of labor market data and lowering health care costs. Andrew Yang admitted politicians are asking him for answers beyond a universal basic income — but gave no indication of what those might be. And Bill Foster, the only PhD physicist in Congress, went as far as to suggest that we compensate people for making eye contact with each other. 

The only one asking the right question was Elizabeth Warren. Not how do we tax AI companies and merely redistribute wealth. Rather, how do we strengthen the resilience of working-class America? 

The good news is, we don't have to look far to find an answer to that question. Not all Rust Belt cities collapsed. In fact, a handful of them even thrived. This is what Brookings expert John C. Austin calls “The Tale of Two Rust Belts”: communities that adapted in the face of deindustrialization and those that didn’t. 

One of those communities is Kalamazoo, Michigan. Between 1995 and 2003, the city lost thousands of jobs as its anchor employer left, manufacturing plants and paper mills shut down, and downtown department stores closed shop. Instead of spiraling into decline, the community responded with coordinated investment. The Kalamazoo Promise, funded by anonymous donors, guaranteed college tuition for all public school graduates. Western Michigan University opened the Business, Technology and Research Park, which retained scientists and helped them incubate new businesses. The local community college set up specialized training programs aligned to emerging industry needs. And the city revitalized its downtown into a hub for arts, culture and new development. In the words of political scientist (and Kalamazoo resident) Michelle Miller-Adams: “There were people who knew what was coming and were very active in thinking about strategies to mitigate the impact. They weren’t just reacting.”

The proactive approach paid off. Despite Pfizer initially cutting 1,200 jobs and almost leaving town altogether in the early 2000s, its Kalamazoo site is now the company’s largest manufacturing facility in the world. Medical device giant Stryker is also proud to call the city home, growing from a small family-owned business into a global Fortune 500 company with over 50,000 employees. Meanwhile, industry titan Bell’s Brewery boasts some of the best craft beer in America with one of the largest distribution footprints by sales volume while the iconic Bell’s Eccentric Cafe, on the site where the brewery was originally founded, serves as a vibrant community anchor in the heart of downtown Kalamazoo. It’s no surprise that since 2010 the wider metro area has experienced steady population growth despite the brain drain that afflicts much of the region.

To achieve such a dramatic turnaround, Kalamazoo didn’t expand welfare or simply create more jobs. It invested in Participation Infrastructure: the foundational architecture that gives people the assets, access and agency they need to participate in the economy. Urban renewal and the WMU research park, for example, provided physical assets where economic activity and innovation could flourish. Affordable educational pathways for youth and adult learners ensured people had access to the skills and credentials needed for emerging industries. And the tuition guarantee and entrepreneurship support, alongside the wider affordability of the region, gave residents genuine agency – not only the ability to choose from different paths but the freed up capital to invest in other areas of their lives from buying a home to saving for retirement. Collectively, this integrated architecture has attracted and retained middle class families, established a consistent pipeline of local talent and helped diversify the economy around the life sciences. By making economic participation possible at almost every level, Kalamazoo created a resilient local ecosystem dependent not on market forces but on the strength of the community itself. 

Kalamazoo is a powerful example of what's possible when a local community deliberately invests in people's capacity to participate in the economy. But it raises the question: what does building participation infrastructure look like at a national scale, especially as AI promises to disrupt nearly every sector, irrespective of class or geography?

Denmark offers a useful starting point. Although Nordic countries are often dismissed as wealthy outliers, that hasn’t always been the case. Throughout the 1970s and 1980s, the country was mired in economic decline with record levels of unemployment, recurring fiscal deficits and mounting foreign debt. The crisis hit a fever pitch in 1993 when nearly 360,000 Danes – more than 12% of the labor force – found themselves out of work. Desperate to turn things around, Denmark introduced a radical new system called Flexicurity that transformed the static safety net into a dynamic trampoline. At its core, the model gives employers the flexibility to hire and fire freely so they can remain competitive in rapidly evolving global markets. But in return, workers receive robust unemployment insurance that covers up to 90% of their wages (capped above a certain income) for up to 2 years while they look for work and retrain if needed. The key ingredient, however, is what sits in the middle: the Danish government fully funds a comprehensive suite of retraining programs, career coaching and job matching services that ensure every worker, regardless of background, has an immediate high-quality on-ramp to their next opportunity. As a result, Denmark now has one of the strongest labor markets in Europe with employment metrics that consistently outperform most advanced economies, including the United States.

However, Flexicurity isn’t the only participation infrastructure that powers Denmark’s economy. Assets like universal healthcare decoupled from employment and housing built around nonprofit and cooperative ownership models mean Danes across income levels can afford a stable foundation. A dual-track education system that equally values technical and higher education pathways forms the backbone of the country’s access architecture. And the financial support for students gives the Kalamazoo Promise a run for its money. Not only is postsecondary education tuition-free, the state pays most Danish university students roughly $1,000 a month just to attend, removing the financial burden that causes too many of their peers across the world to drop out of school altogether. Finally, amplifying the country’s agency layer is Innovation Fund Denmark — the government’s public investment arm — which de-risks entrepreneurship at every level from microgrants for recent graduates to large scale partnerships between businesses and universities aimed at tackling some of society’s biggest challenges.

Today, Denmark is the 6th most competitive economy in the world, behind only Switzerland among Western democracies. It also frequently claims one of the top spots in the European Union for entrepreneurship and innovation, producing household names like Trustpilot, Zendesk and Unity (the video game engine behind Pokémon GO and Among Us). However, what’s more interesting is how this impacts workers. Despite no minimum wage, Danes enjoy exceptionally high incomes with less than 10% working low-wage jobs (compared to nearly 25% of Americans). Moreover, Danish unions, contrary to the usual stereotype, largely support AI and automation. In fact, Denmark leads Europe in AI adoption at more than double the EU average while serving as the region’s frontrunner in cutting-edge robotics technology. Because the system naturally supports workers through transitions, they embrace change rather than resist it. And the participation infrastructure pays for itself. With an exceptionally large tax base of participating, well-paid citizens, Denmark enjoys a remarkable debt-to-GDP ratio just under 28%, recording consecutive fiscal surpluses for the last decade, including through the COVID-19 pandemic and recent increases in defense spending.

This is what happens when a country makes participation the foundation of its economy rather than a byproduct of growth. Yet, when we talk about job displacement, whether it’s AI or the previous waves of deindustrialization, it’s almost always framed as a necessary blow to be softened while we hope for new opportunities to emerge on the other side. But, as Kalamazoo and Denmark both demonstrate, economic resilience isn’t a matter of just protecting workers through transitions, it’s about building the underlying architecture that enables people to continuously participate. 

Most economies are far too brittle because they treat participation as a problem to be managed, only intervening after things break down. Unemployment benefits, housing support and food assistance all tend to be stigmatized social services that arrive once the system has already failed. When countries do invest in participation infrastructure, it’s wrongly labeled as discretionary welfare spending and is the first to go when budgets tighten. In the years following the 2008 financial crisis, the UK, for example, cut spending on affordable housing by more than 50%, closed over 1,000 SureStart childcare centres and ended the Education Maintenance Allowance in England, which helped thousands of low-income students stay in school. Coincidentally, Britain has been stuck in a doom loop of stagnation, low productivity and debilitating debt ever since.

Participation infrastructure isn’t a nice-to-have when times are good. It’s capital investment in the productive capacity that makes economies grow. More people participating means more people creating value, more people starting businesses, more people innovating and more people meeting the human needs that keep all of us going. Like tending a garden, it’s about cultivating the conditions for diverse forms of economic activity to emerge by ensuring everyone has the assets, access and agency they need to contribute. 

Contrary to what the Rust Belt might suggest, the United States is not a stranger to investing in participation infrastructure when the moment demands it. Following the Second World War, the country faced a familiar challenge: an entire generation of returning servicemen and women structurally displaced from the economy. The Servicemen’s Readjustment Act of 1944, otherwise known as the G.I. Bill, funded support that touched every layer of economic life. Low-interest housing loans with no down payment put homeownership in reach for millions of families. Tuition guarantees enabled over 7 million veterans to enroll in higher education or specialized training programs. Dedicated job placement services helped returnees find opportunities based on their military experience while government-backed small business loans turned more than 200,000 veterans into self-employed entrepreneurs. And much like Flexicurity, a generous living stipend for up to 52 weeks gave returnees the time, security and support to figure out what they wanted to do next. According to a 1988 report from the Congressional Joint Economic Committee, the investment paid for itself nearly seven times over through an expanded tax base and increased economic output. Even though its benefits were shared unevenly, the G.I. Bill is widely credited with laying the foundation of the postwar middle class that historians like to call the golden age of capitalism. 

AI is yet another opportunity to build participation infrastructure at scale. Not because mass job losses are inevitable, but because the threat it represents exposes the structural weaknesses in too many of our economic systems. Developing more resilient economies is no longer a mystery. It’s a matter of political will, ambition and the collective imagination to do things differently. Letting people become economically irrelevant is a choice, not a necessity. From field to factory to firm, we’ve continuously reinvented what counts as human contribution. This time will be no different. What will make it different is whether we invest in the economic architecture that enables all of us to participate in shaping more powerful economies or sit back and let our fates be decided for us. That’s the challenge that will not only define the age of AI, but the future of human prosperity itself. The blueprint is there. Now it’s our job to use it. 

The headline unemployment rate in the United States currently sits at a “healthy” 4.4%. But that number masks the true state of the economy. The U-6 rate — a broader measure that includes the underemployed, discouraged jobseekers and involuntary part-timers — is closer to 8%, or 13.5 million Americans. Yet even that number ignores the tens of millions more who make up the lost workforce: prime-age adults economically inactive due to caregiving responsibilities, perverse benefit cliffs that punish upward mobility and other institutional barriers that have led them to give up looking for work altogether. And that’s before we get to the nearly 40 million Americans trapped in low-wage jobs that leave most of them functionally unemployed — working full-time yet unable to meet even their basic needs.

At the same time, there are 6.5 million unfilled job vacancies currently in the labor market. But once again, that’s just the tip of the iceberg. The U.S. faces severe talent gaps across many of its most critical industries from education and healthcare to construction and the skilled trades. Outdated infrastructure, housing shortages and insufficient healthcare provision among other challenges cost the U.S. more than a trillion dollars each year in lost productivity and untapped potential. This massive mismatch between human capital and unmet need is at the heart of why Peter Diamond, Dale Mortensen and Christopher Pissarides won the Nobel Prize in 2010. They found that even in a “perfect” market, information gaps, coordination failures and other systemic inefficiencies can prevent talent and opportunity from ever finding each other.

As a college intern in 2019 I worked for Ascend Indiana — a nonprofit dedicated to addressing exactly this market failure. I still vividly remember the slide from their executive deck: two arrows running past each other — one representing the state’s talent; the other the needs of its employers. But instead of merely connecting job seekers to vacancies, they focused on building end-to-end employment pathways through strategic partnerships between universities and employers. From full-ride scholarships for tailored degree programs to guaranteed apprenticeships accompanied by a career coach, every step of the journey from enrollment to employment was intentionally designed.

Despite the impact of organizations like Ascend, there’s a surprising lack of language that does justice to the architecture that shapes how people participate in the economy. The closest label would be “workforce development” but that describes what these organizations do, not necessarily what they build. Some might call it “soft” infrastructure, but that’s a catch-all so broad it groups career pathways alongside parks, hospitals and the local fire brigade. Economics does have plenty of terminology for the component parts — physical assets, human capital, industrial policy — but nothing that unifies them into a single, coherent category. That’s Participation Infrastructure: the diverse systems, institutions and mechanisms that determine whether talent and opportunity actually find each other.

Participation infrastructure can be broken down into three interdependent layers: Assets, Access and Agency. Assets are the material foundations that make participation possible from housing and transportation to healthcare and broadband. Without these, nothing else matters. People can’t show up to work without transport links nor can they do a virtual interview without Wi-Fi. We also need the physical spaces — office buildings, co-working hubs, research labs — alongside the digital infrastructure for learning and work to happen in the first place.

Access meanwhile refers to the systems and mechanisms that open doors to opportunity. Schools, universities and training programs equip people with the credentials they need to qualify while internships and apprenticeships bridge the gap between learning and earning. But access also includes the connective tissue like job matching platforms, recruitment pipelines and professional networks that help people find openings they might not discover on their own.

Finally, Agency is what expands people’s ability to choose how they contribute — the institutional support that gives them the capacity to determine what their participation looks like. Career coaching and mentorship help people broaden their horizons, seed funding encourages entrepreneurs to take risks and start new businesses, and subsidized childcare gives parents the bandwidth to re-invest in their careers. Crucially, agency also encompasses the collective power to shape participation itself through democratic processes from worker representation to political engagement. If assets provide the foundation and access opens the door, agency is what allows a person to walk through it on their own terms.

The transformative impact of Participation Infrastructure

One of the most disheartening things when I worked as a teacher at an under-resourced school in Indianapolis was asking my middle school students what they wanted to be when they grew up. For every student that dreamed of being a doctor or professional athlete, I got an equal number that would simply write “the military.” When I asked why, the answer had nothing to do with them liking guns or playing Call of Duty. It was a cold calculation. Having already ruled out college due to their grades and the impossible price tag, the military was the only alternative they could see that offered a clear pathway to economic security.

This isn’t a coincidence. The U.S. military has built arguably the most complete participation infrastructure in existence. From the recruitment tables in high school cafeterias to the GI Bill after service, they’ve essentially reduced the cost of participation to nearly zero. All you have to do is show up and they take care of the rest. Assets like housing and healthcare are all provided. Structured training, clear progression and a robust credentialing system mean service members can build a career. And once you’ve served, the agency follows: the GI Bill funds whatever education you choose, VA loans help you buy a home and specialized support systems can even assist veterans in starting their own business. No other institution in America comes close to offering that package.

Service members honorably earn that level of support. But the military reveals something deeper about where participation infrastructure gets built — and who it gets built for. In its most complete form, participation infrastructure tends to exist where powerful institutions need people badly enough to make the investment. The military needs recruits, so it paves a frictionless pathway from high school to service. Top consulting firms and investment banks need analysts, so they build graduate pipelines that cover relocation, training and promotional pathways from day one. Meanwhile, the U.S. care economy has approximately 1.8 million vacancies and lacks anything remotely comparable to fill them. The same goes for teaching, nursing, the skilled trades and countless other pathways that we say matter but are often the hardest to see and most expensive to walk. Where those gaps exist, nonprofits like Teach For America and Ascend step in to build what the market and the state haven’t — but they’re patchwork by necessity, dependent on philanthropic funding that limits their scale and scope.

This uneven distribution doesn’t just reflect priorities. It determines individual outcomes. A single parent who wants to retrain for a growing industry faces a stack of transaction costs the military would never ask of a recruit — tuition, childcare, transport, lost income during training. A high school graduate in a deindustrialized town may never discover that careers in renewable energy or cybersecurity exist, let alone find a pathway into them. A retail worker barely earning a living wage has no time, money or institutional support to pivot into the skilled trades or healthcare roles the economy desperately needs. In each case, every step toward economic participation is a market transaction individuals are expected to navigate alone. The barrier is rarely talent or ambition. It’s the absence of participation infrastructure.

These individual participation failures don’t just result in personal misfortunes; they compound into systemic economic damage. The longer someone sits idle — or remains trapped in work far below their potential — the more their skills atrophy, their professional networks erode and their confidence wanes. Multiply that across an entire community or region and what might have started as a series of job losses can eventually morph into structural decline. This is what economists refer to as “hysteresis,” a concept popularized by Olivier Blanchard and Lawrence Summers when critiquing Europe’s unemployment problem in the 1980s. Contrary to the prevailing belief that economies naturally recover after a downturn, Blanchard and Summers demonstrated that prolonged unemployment results in economic scarring, permanently diminishing the economy’s productive capacity.

However, hysteresis is not a foregone conclusion. When deindustrialization swept through the American Rust Belt, most places followed the textbook pattern: factories closed, jobs disappeared and communities fell apart. But a handful of places broke that cycle. Kalamazoo, Michigan for example didn’t wait passively for the market to correct itself. Instead, local leaders, businesses and private donors came together to build participation infrastructure before we had a name for it. The Kalamazoo Promise guaranteed college tuition for every public school graduate, public-private research parks retained talent and incubated new businesses, retraining centers upskilled displaced workers and strategic investment revitalized the city’s downtown into a thriving hub for arts and culture. Kalamazoo didn’t just reconnect people to the old economy. It built the infrastructure to participate in the new one.

This brings us to a crucial point: participation infrastructure does far more than just connect people to existing opportunities. It fundamentally transforms what is economically possible. The Kalamazoo Promise not only expanded access to university, it made people stay, which attracted more investment from companies like Pfizer, helping rebuild the local economy around the life sciences and specialized manufacturing. Yet the most powerful example of this dynamic operates on an entirely different scale. When Abraham Lincoln signed the Morrill Act in 1862, granting federal land to every state to fund public universities, the goal wasn’t just idealistic: the Union needed mechanics, industrialized agriculture and a skilled workforce to win the Civil War and build what came after. But by opening higher education to millions of working-class Americans for the first time — providing the assets, access and agency that had previously been reserved for the wealthy — the Act unleashed something no one could have predicted. UC Berkeley, MIT and Texas A&M didn’t just improve agriculture; they produced the scientists, engineers and researchers whose work powered American industrialization, transformed global food production and eventually laid the foundation for the knowledge economy. The entire engine of twentieth-century innovation was the downstream impact of a bold investment in participation infrastructure made the century prior.

The Morrill Act is a humbling reminder that the economy has never been a fixed thing that happens to us. It’s a product of the architecture we build within it. Yet until now, the infrastructure that connects people to economic participation has been fragmented. Not because the pieces don’t exist, but because we haven’t had the language to see them as a unified system. Naming it changes that. What we can name, we can measure. What we can measure, we can compare. And what we can compare, we can deliberately invest in. In a time when advanced economies are stagnating, inequality is deepening and AI threatens to upend the labor market as we know it, the question isn’t whether participation infrastructure matters. It’s whether we’ll build it with the same intentionality the military brings to its recruits, the same ambition Lincoln brought to the Morrill Act and the same urgency that this moment demands.

A version of this article was published in The New Statesman on 7 December 2025.

During my first experience working in UK local government with the London Borough of Hackney’s homelessness prevention service, I remember being asked by a senior manager: ‘Have you ever worked in a system this insane before?’ I assumed she was referring to the thousands of families living in temporary accommodation, the housing officers overburdened with ever-expanding case loads and the utter lack of resources to really do much of anything about it.

I pondered for a second and replied, ‘Yes, I have actually’. The local authority dilemma of trying to do more with less while serving vulnerable populations reminded me of my time working for an under-resourced school back home in Indianapolis - overcrowded classrooms, special needs case loads double the size of statutory limits and teachers burnt out by the outsized pressure to deliver impossible results.

Like the US education system, UK local government has been severely underfunded for years. The National Audit Office reported that government-funded spending power for local authorities decreased by more than 50% between 2010 and 2021. Since 2018, four times as many local authorities have gone bankrupt than in the past 30 years combined. It’s no surprise that the debt pile for all UK councils currently sits at £122 billion.

Although Conservative-led governments oversaw this managed decline of public services, Labour - a party traditionally in favour of public investment - has struggled to escape austerity’s grasp. Despite providing local authorities with a short-term funding boost in 2024/25, spending on unprotected services (e.g. social care, libraries and criminal justice) is still expected to decline in real terms by 1.3% per year after 2025/26. Labour has also attempted to reduce benefits like the winter fuel allowance and support for those with disabilities.

Labour’s ‘tough choices’ have led Anoosh Chakelian to argue that “Britain is trapped in Forever Austerity”. A 4% increase to NHS funding doesn’t matter much if the lack of social care drives up health inequalities. Nor does £39bn for new homes if council planning departments don’t have the capacity to deliver those homes at pace.

Herein lies the issue — even a political party elected on the promise of delivering change is trapped in the same outdated thinking that has held the UK back from realising its full potential. It’s becoming increasingly difficult to justify a brand of economics that disproportionately impacts those most in need while subjecting public servants — people who genuinely want to help — to a scarcity mindset they can never quite escape.

Austerity is a political choice, not an economic necessity. The reason political parties across the spectrum continue to fall into the same trap is because the entire way we think about government finances is deeply flawed. The idea that the government must cut services or raise taxes to fund public investment simply does not apply to a country like the UK.

Understanding this reality could be the shift that finally sets Britain free and positions it to deliver the thriving future its people so desperately need.

Why government finances don’t work the way we think

Although we must still hold leaders accountable for the current failures, it’s important to acknowledge that for most of history government finances have worked in a way that made austerity a rational policy choice (albeit a painful one). Under monetary systems like the gold standard, accruing debt meant depleting finite gold reserves, putting the government at risk of insolvency and economic collapse. When debt levels would rise too high, austerity was the obvious answer: cut government spending and raise taxes to bring the debt back down.

But when the US abandoned gold in 1971, everything changed. What started as a desperate measure to stop haemorrhaging gold reserves during the Vietnam War became a permanent feature of the global economic system. Attempts to restore the gold standard quickly failed as the number of dollars in circulation had outgrown the supply of gold, requiring either crippling deflation or forfeiting the dollar’s dominance in global trade. For the first time in modern history, money was no longer backed by a physical commodity but by government credibility alone.

Leaders at the time understood that the shift to what is referred to as fiat money gave them more flexibility during crises to run larger deficits when they needed to. But what many still don’t grasp to this day is that abandoning commodity-backed currency fundamentally transformed the way government finances work. Countries like the US and the UK suddenly became powerful currency issuers rather than mere users.

You and I, along with businesses, local authorities and most other actors in the economy are users of currency. We must earn or borrow money before we can spend. We need to balance the books and ideally generate a surplus so we can save for the future. Currency issuers on the other hand play by a different set of rules.

According to Richard Murphy, Professor Emeritus of Accounting Practice at the University of Sheffield, “A currency-issuing government cannot run out of money. It can always pay in its own currency”. Whereas governments historically needed to raise revenue through taxation or borrowing, this no longer applies to currency-issuing governments. In fact, economist Stephanie Kelton explains in The Deficit Myth that the sequence is reversed: currency issuers must spend first to put money into circulation before people can use that money to pay taxes or buy gilts. To paraphrase her, taxpayers don’t fund the government; the government funds the taxpayers.

This fundamentally changes the calculus of government finances. Most notably, currency-issuing governments don’t need to balance the books. Running deficits and accruing debt is not the solvency risk it once was. Alan Greenspan, the former Chair of The Federal Reserve said it himself: “The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default.” The same is true for the UK. Similarly, taxes aren’t needed to raise revenue; they serve other purposes, such as managing inflation (taking money out of the economy), creating demand for the currency (we must pay our taxes in pounds sterling) and redistributing wealth.

This doesn’t mean there aren’t real constraints, however. While currency issuers don’t have to worry about the debt most of us fear, they do have to worry about demand-pull inflation, which occurs when there’s too much money relative to available goods and services. Carelessly creating new money without anywhere productive for that money to go runs the risk of crippling hyperinflation and economic instability. This is distinct from the cost-push inflation caused by external supply shocks, which is largely responsible for the UK’s recent price increases.

The primary limitation for currency issuers therefore is not the size of the public debt but the economy’s productive capacity — the ability to convert money into real goods and services. As Kelton explains, “Every economy has its own internal speed limit. It’s only possible to produce so much, at any point in time, given the real resources — people, factories, machines, raw materials - available in that moment.” Spend beyond what the economy can produce and you get inflation. Spend too little while resources sit idle and you condemn the economy to stagnation.

Modern Monetary Theory (MMT), the economic framework that explains this reality, is not so much a theory as it is an honest description of how government finances work in the fiat currency era. Bill Mitchell, Professor Emeritus of Economics at the University of Newcastle, Australia, says, “Such an understanding will change the questions we ask of our politicians and the range of acceptable answers that they will be able to give”.

This expands what’s politically possible. Rather than tying themselves in knots to balance the books, currency-issuing governments can properly steward the economy. With greater control over the money supply, they can more strategically deploy fiscal policy to mobilise idle resources (e.g. unemployed workers, crumbling infrastructure), fund transformative public investments and actually expand productive capacity in ways that were limited under the gold standard. The question is not whether we can afford a brighter future, but whether we have the resources to build it.

The issue is that we’re still governing like we’re in the other 99% of history, treating government finances like a household budget and subjecting everyone to artificial constraints that are no longer needed. When the US abandoned gold, the nature of money changed but our mental models didn’t.

This lag in up-to-date thinking has had devastating consequences for the UK economy. GDP is £11,000 less per person than if pre-2008 growth had continued. Infrastructure investment lags £700 bn behind what experts say is needed. And Britain is the only advanced economy where economic inactivity has increased since the pandemic. According to the Institute for Fiscal Studies, the UK’s productivity decline is largely due to the government choosing “not to [invest] due to the growing deficit”. The fact the UK’s debt-to-GDP ratio is approaching 100 per cent is not because the government overspent, but because austerity stifled the very growth needed to address it.

But the mental gymnastics persist. Although Reeves claims “there can be no return to austerity”, her fiscal rules of balancing the Budget and paying off the debt prevent her from leaving it behind for good. Despite welcome infrastructure investment, Reeves decided to freeze income tax thresholds for longer than expected, stealthily raising taxes for millions in the future. At the same time, the Resolution Foundation warns that public services outside of the NHS, education and defence will still face cuts toward the end of the decade close to those made during “peak austerity years”.

Meanwhile, the number of families living in temporary accommodation continues to reach record highs. What makes this failure even more damning is that the UK has complete monetary sovereignty: not only the ability to issue its own currency, but maintain a floating exchange rate, avoid borrowing in foreign currencies and have no external fiscal restrictions (foreign investors do own roughly 25 per cent of UK debt but that debt is denominated in pounds). This gives the UK a strategic advantage over its Eurozone neighbours.

Brexit: a blessing in disguise?

Despite keeping the pound sterling and opting out of punitive sanctions under the Maastricht Treaty, the UK was still subject to fiscal coordination requirements, such as limiting deficits to 3% of GDP and maintaining a debt-to-GDP ratio below 60% as an EU member. While the UK could have leveraged its exception to avoid austerity, doing so would have carried political consequences. Twice the European Commission opened an Excessive Deficit Procedure (EDP) against the UK, first from 2005-2007 and then again from 2008-2017 as it struggled to recover from the financial crisis. Both times, it complied with EU recommendations on how to correct its deficits.

Post-Brexit, although few seem to have noticed, the UK has stumbled into an ideal situation that puts it in an envious position over its eurozone neighbours. Not only are they bound by stricter fiscal rules than the UK ever was, but by adopting the euro they’ve been relegated to mere currency users. Unable to create their own money and dependent on the European Central Bank, they’ve forfeited their monetary sovereignty entirely. As Nobel-winning economist Joseph Stiglitz writes, “the eurozone was flawed at birth”.

This dysfunctional setup has had serious consequences for the region’s economies. France and Germany both have significant economic slack but struggle to deploy the fiscal expansion needed to mobilise it. Spain’s youth unemployment has exceeded 25% for years, yet eurozone rules limit the fiscal response needed to address it.

Most devastating has been Greece’s debt crisis. As a currency user, Greece faced genuine insolvency. The economy contracted by 25%, unemployment exceeded 27% and the country was forced into punishing austerity. Had Greece maintained its monetary sovereignty with the Drachma, it could have managed the crisis more effectively and prevented years of suffering. Yanis Varoufakis, the Greek economist who served as Finance Minister during the crisis, says: “We have created the gold standard in the middle of Europe. As we know, the gold standard is pretty good during the good times and it’s really appalling in bad times”.

By leaving the EU, the UK hasn’t just escaped cumbersome fiscal monitoring, it’s untangled itself politically from a group of currency users that don’t share its fiscal freedom. Nevertheless, the UK continues to squander this strategic advantage. Rather than binding rules like the EU, the UK’s fiscal targets are voluntary political commitments set by the Chancellor that can be changed at any time. Reeves for example decided on two self-imposed targets: day-to-day spending must be matched by tax revenues (i.e. a balanced budget) and debt must be falling as a share of GDP, both by fiscal year 2029/30.

In 2024, Reeves was barely within range to achieve a balanced budget by 2029/30. Ahead of the Autumn 2025 Budget, a projected 0.3 per cent downgrade in the Office for Budget Responsibility’s productivity forecast created a £20 bn shortfall that forced Reeves to consider raising the headline income tax rate for the first time since 1975. Even though last-minute projections ended up being more favourable than anticipated, this still demonstrates an obsession with satisfying arbitrary rules above all else.

To clarify, these policy decisions are not driven by actual economic events but by minor tweaks to imperfect OBR models about what might happen in the future. According to Larry Elliot, the longstanding economics editor at The Guardian, “The OBR struggles to forecast accurately what will happen to the public finances one year ahead, let alone four years ahead…the OBR’s forecasts are just guesswork. Informed guesswork, but still guesswork”.

Instead of using its monetary sovereignty to invest in ways that actually improve the fiscal picture long-term, the UK system, with its arbitrary rules and abstract modelling, favours the very austerity that makes low growth inevitable. While Brexit is routinely blamed by politicians, including Reeves herself, for the UK’s poor economic performance, leaving has gifted it the full monetary sovereignty that eurozone countries could only dream of. Regardless of whether it was the right decision, the real debate now is how the UK can leverage its fiscal freedom to finally build an economy that works.

Charting a new course

Recently, I facilitated a creative thinking exercise with GPs from the NHS where participants go through three rounds of making changes to their appearance without undoing anything along the way. Some people remove their watch or even a shoe. During the debrief, a GP made a comment that stuck with me: “I was so focused on removing things that I completely forgot I could have been adding the entire time”.

This is exactly the position the UK finds itself in, continuing to follow self-imposed constraints while the very capabilities needed to build something meaningful are right there in its grasp. The failure to think differently has resulted in millions of its people ensnared in a cost-of-living crisis, including 4.3 million children growing up in poverty.

But the real negligence is that chronic underinvestment actively shrinks future productive capacity. The UK is not just failing to mobilise idle resources to meet pressing needs today; it’s ensuring that it will be even less capable of delivering prosperity tomorrow.

Beyond the immediate human cost of inaction, the UK faces impending domestic challenges that demand the very fiscal response that the current paradigm prevents. AI disruption, an ageing population and the ongoing climate transition all require public investment over long time horizons that don’t fit neatly into annual budget cycles. The inability to meet these challenges not only undermines the UK’s global economic influence but risks the future of democratic governance itself.

More than ever, the UK needs brave leadership to chart a new course. Keir Starmer clearly recognised this in his Plan for Change speech when he invoked President Kennedy’s famous moonshot: “We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard”. Kennedy’s words weren’t just rhetoric — they were a radical departure from the fiscal restraint that had preceded them, made at a moment when the US was quickly ceding ground to the Soviet Union. The technological dominance that the US economy enjoys today can be directly traced back to the decades of strategic public investment that began with Kennedy’s courage to defy convention. Starmer may have chosen the easy path but that doesn’t have to define Britain’s future.

Naturally, sceptics will point to the bond market as the reason for why the UK can’t engage in the fiscal expansion that is needed. But as Cambridge economist Dimitri Zenghelis notes, “What unsettles the bond market is not the level of UK public debt… It is doubt about the UK’s ability to grow without requiring persistently high interest rates.” This is the doom loop in action. Decades of underinvestment have left the UK struggling to grow without triggering inflation – not because demand is too high, but because productive capacity is too low. The solution isn’t paying down the debt, but bold investment in productive capacity that breaks the cycle.

Reeves’s £120bn infrastructure investment and scrapping the two child benefit cap are steps in the right direction but her debt reduction targets constrain the economy far below what is needed. As a monetary sovereign free from solvency risk, the UK should set fiscal targets based not on abstract debt ratios but on real economic outcomes: increasing investment as a share of GDP, closing the infrastructure gap, reducing economic inactivity or lifting millions out of poverty. This means building transport links in underinvested regions, expanding childcare so parents can work, retraining workers in high-demand skills, modernising the energy grid and constructing affordable homes. This isn’t reckless borrowing; it’s investing in what matters.

Years of austerity have conditioned the UK to accept artificial constraints as if they were immutable economic laws. But like a horse with a rope around its neck that’s no longer tied to its post – the UK is constrained only by the belief that it cannot move. The resources are there. The needs are urgent. All it needs to do is go.