Building recovery with 'slow money'
18 May 2015
Politicians, regulators and the media unfairly blamed the financial crisis solely on the banks.
But, of course, it was much more complex than this.
Politicians, regulators and the media unfairly blamed the financial crisis solely on the banks. But, of course, it was much more complex than this. The result of this analysis is that we’ve been left with a triangle of austerity: economic, political and regulatory.
A convenient solution to the crisis was quantitative easing, or ‘monetary methadone’, which drove asset price inflation, addiction to cheap money, inequality, and massive government deficits. QE is a ‘fast money’ tool which has benefitted rich people, whereas sustainable growth comes from ‘slow money’, Legal & General’s favoured investment model.
We know that ‘fast money’ policies prevented the Great Recession from becoming an even worse depression, but what’s needed now are more progressive economic policies.
The focus on monetary tools and the blame game has diverted attention from the many real opportunities there are to create growth and also to deliver a fairer society.
- Supplying genuinely 21st century infrastructure is the most obvious engine for growth, including renewal of our urban centres across the UK. Many city centres are not overbuilt but are under demolished.
- A massive increase in intellectual rather than physical property, not just in the big tech brands like Facebook and Google, but also in healthcare and education, where the digital age has just begun.
- Using digital technology, demographic opportunities and intergenerational economics to fashion new social security and protection systems. New systems that are better suited to help ‘last time buyers’, savers in a low interest rate world and families struggling on average incomes.
We can help governments by designing and delivering economically and socially useful products based around what we see as the five drivers of global growth: ageing populations; digital lifestyles; social welfare reforms; globally homogenous asset markets and retrenching banks.
We’ve already invested £5.7 billion in a number of ‘slow money’ projects that synchronise with the five drivers. This includes financing new student accommodation at universities across the UK, such as Imperial College and the University of Southampton. In partnership with English Cities Fund and a number of local authorities, we’ve been helping regenerateSalford, Liverpool, Wakefield, Plymouth and Canning Town. We also provided finance for “Places for People”, a £252 million investment that will provide 7,000 new homes.
But our investments are not limited to housing. We’ve also worked with the Royal Liverpool Hospital to finance the construction of a new hospital with 646 acute beds and we’ve put £220 million of our ‘slow money’ into the care home sector. These are just a handful of examples.
There’s more we do, and there’s more we can do across every sector from transport to energy. Working with insurers, the next government can, even within the constraints of deficit reduction, continue to build infrastructure, deliver new financial security for working families and tackle the housing crisis.
'Slow money' has a lot to offer.