This article was originally written by New Start magazine. We’re reposting here with gratitude and full credits given to New Start.
Across the UK places are rethinking local economic development. Recession and austerity may have prompted the rethink but, for many areas, the new economics is proving a more effective and equitable way to create and sustain communities
When the governor of the Bank of England Mark Carney last week announced rapid growth forecasts for the economy, local areas could be forgiven for not agreeing with his ‘glass half fall’ analogy. Traditional economics has not always served local areas well, and has in many cases made things worse. As austerity and financial collapse play havoc on local areas and their economic prospects, the realisation is dawning that traditional responses are not working. Places are questioning the traditional and opening their eyes to the alternative.
Why focus on rising GDP at all costs when your place has not grown and has no hope of growing for decades? Why enter the beauty content of inward investment only to entice corporates with no interest in the local economy that leave as soon as their profits slip? Why build an economy around consumption when white elephants that, having not led to trickledown, are now being knocked down?
Until recently experiments in local economics were small-scale and peripheral. But the failures of orthodox approaches are leading even the most successful local economies to find new ways to boost jobs and revitalise communities. With a paucity of ideas and support from central government local areas are now abandoning laissez faire for more interventionist approaches.
From localising the corporate social responsibility programmes of supermarkets and energy companies in Enfield to collaborative economics in Sunderland and community wealth building programmes in Preston, a new local economics is emerging.
Localising CSR: Challenging the corporates
Leading the charge for change are places that have always been left out of the party. Enfield in north London is far from the capital’s tourist trail, the City’s financial district or the tech hubs of the rapidly developing east end. Having deindustrialised from the 1980s, its metrics are similar to a northern industrial town. While the skilled population commutes into London, low skilled jobs are few and far between, and, with austerity meaning cuts of 25% to the local authority, public sector jobs are also in decline. When councillors and officers sat down to try to improve their local economic situation they realised that the mainstream solutions were not for them.
Enfield was losing out to other areas in the inward investment contest, and central government approaches – local enterprise partnerships and a focus on building glamorous sectors such as advanced manufacturing and technology – were failing to make much impact.
‘We had a strong sense that light touch economic intervention had not and would not work in Enfield’, said Enfield councillor Alan Sitkin at last week’s Rethinking Prosperity: Experiments in local Economics event. ‘It’s like Einstein’s definition of insanity – doing the same thing over and over again and expecting the same result.’
In order to break the cycle the council brought in researchers from the Centre for Research on Socio-cultural Change (CRESC), and with their help decided to focus not on a cavalry from outside but on what’s left of its economy, the ‘mundane’ public and private sector activities which rarely make it to the glossy regeneration brochures but which account for 40% of the UK’s workforce and often even more in disadvantaged areas. CRESC calls this the ‘foundational economy’: the health, education and welfare employers in the public sector and the electricity, gas, retail banking and supermarkets and associated businesses.
‘It’s about building on what you have’, says Professor Julie Froud of CRESC. ‘Local authorities often don’t know their own local economies – who the large employers are, where are the existing supply chains and where the pounds are spent. It’s about working with these mundane employers to connect them more with their local communities, to localise social responsibility.’
CRESC research had found that utilities companies and supermarkets were taking nearly £100 a week from each household in the locality and giving little back beyond tokenistic corporate social responsibility programmes.
‘Our household spend and tax revenues sustain the supermarkets and utilities and the central state isn’t challenging their business models’, said Karel Williams of CRESC.
So Enfield Council, ‘called in the six utilities and read them the riot act’, according to Sitkin. British Gas was one of the most responsive and has since signed a £10m contract for retrofit of insulation in the area and plans to hire 100 Enfield school leavers. It is also interested in building a University Technical college in the locality. Thames Water has planned a schedule of works so that the council can upskill local contractors and labour. The council’s next targets are the big banks, with plans for a speed-dating event to get small and medium –sized businesses connected with a bank that will loan to them.
‘Councils have one strong weapon at their disposal – procurement. If large corporates don’t want to play ball and hire and skill up local people, we can take our business elsewhere’, says Sitkin.
Localisation: The multiplier effect
Thus the new local economics is focused, not on attracting wealth inwards but on working with the wealth already available – existing businesses and, in particular, the money that flows through the economy. Progressive councils in the UK are turning their attention to ensuring their procurement budgets – worth around £80bn a year – work harder for their local economies. As Justin Bentham of Salford Council said: ‘It’s about a broader concept of value. We see our spend in terms of how it impacts on the local economy, how many jobs it supports.’
Salford Council has researched how much of its spend stays within the local region and is now planning to work with those further down the supply chain.
Preston Council is going further, experimenting with the localisation of the supply chains of its colleges, university and other ‘anchor’ institutions as well as its councils. One of the fastest growing economies in the UK outside London, it has just secured a city deal which will support its economy in a traditional way, with investment in infrastructure to attract new private sector business and boost demand. But the council is also investing in a range of programmes to ensure it protects its existing population.
‘We can’t do what we were doing before’, says Derek Whyte, assistant director of regeneration at Preston Council. ‘It’s about finding approaches to improving access to employment using the resources we have available.’
The council recently launched a Community Wealth Building programme, modelled on Evergreen in Cleveland, Ohio.
Working with the Centre for Local Economic Strategies, Preston Council is researching how much of the procurement spend of institutions – including Preston College, the University of Central Lancashire and Preston Council itself – actually stays in the local region.
‘The findings so far suggest that each institution spends less locally than you’d expect’, Whyte says. ‘There’s scope for us to improve that by looking at how to maximise local spend and supply chains and if there are any gaps in the local market, think about what we could do to fill it.’
The Evergreen model fills those gaps through a network of co-ops supplying food, energy and laundry services to local institutions. Preston Council is considering emulating this approach and has undertaken a number of initiatives to boost and expand local coops, including setting up a Co-operative Guild network.
For many areas looking to build new local economic models, co-operatives are the inspiration. Spreading wealth and ownership, co-ops have remained remarkably resilient during the recession. Only one company within Mondragon in Spain has closed during the recession and the Italian region of Emilia Romagna – where 30% of regional GVA is accounted for by cooperatives – showed the benefits of local mutuality when earthquakes struck the region in 2012.
For many the appeal of co-operative models lies in their networked approach to local economics – co-ops work together, support each other and combine and blend their agendas. The new local economics now spreading across the UK is hoping to do the same by building up local networks and blending and combining the social and the economic.
Collaborative local economics
Often overlooked in traditional approaches to economic development, networks are at the heart of some of the most successful local economies. In cities like Copenhagen and Barcelona collaboration and strong links between the social, public and private sectors have reduced inequalities and strengthened prosperity alongside and in combination with an increased economic growth. Barcelona has a strategy of ‘putting people first’ and has heavily supported its third sector in a bid to become a leading city in care, services and quality of life.
For local areas in the UK, key to a more collaborative approach to local economics is building stronger links with the local business sector and the local ‘social’ economy, sectors that are often left off traditional local economic plans.
High levels of small and medium sized businesses and local ownership within an area perform better in terms of employment growth, particularly in disadvantaged areas, compared to larger businesses, according to the findings of Localise West Midlands’ report into mainstreaming community economic development. Smaller locally-owned businesses also boost inclusion and health, redistribute wealth and add to local diversity.
Manchester Council has embarked on a series of initiatives to support its local ‘civil economy’ in order to level some of the economic disparities in the city and bring a more networked approach to its governance and economic fortunes.
Research by Manchester Community Central found that the city’s civil economy – made up of voluntary and community organisations and social enterprises – is worth £477m to the city’s economy, equal to 5.4% of its economic output and worth more to the city than football. Strengthening and building this sector will not only build and strengthen a key plank of its economy but, the council believes, will also strengthen the city’s networks.
It is now developing a civil economy framework that will lead to a new model of collective leadership in the city, boosting links between the business and social sectors in particular, and building capacity within its communities as the council’s own service delivery role shrinks.
It has come up with a new econometric model which looks beyond GVA as the sole conception of economic success and instead places equal emphasis on its role in supporting communities as it reforms its local public services.
Collaborative growth models are emerging around the country. Leeds Empties, a social enterprise, acts as the connector between local government, local business and civil society, bringing the three together in order to tackle the problem of empty homes. Henry Kippin is a director at Collaborate, a social enterprise focused on how the public, private and social sectors can work better together for improved social outcomes.
‘It’s about a more holistic approach to growth,’ Kippin said. ‘A productive city has to blend economic growth with the wellbeing of communities and with public service reform. These need to be part of the same conversation. Public service reform can be linked to enhancing skills, for example, which can be linked to local business. These agendas all cut across each other.’
In Sunderland a Community Leadership model is at the heart of the city’s future plans. It is building a more collaborative local economics, that strengthens the connections between elected members and the communities they serve, and combines public service reform with local growth.
Its new programme includes plans to prioritise support for SMEs in the area and to encourage entrepreneurialism among its population.
‘We need to encourage people to be hungry for success and to be aware of how the world economy is changing,’ says leader of Sunderland council Paul Watson. ‘Most of all we need to look at all of our people and see each one of them as the assets they are.’
The story of Reso in Montreal shows what a collaborative approach can do on a large scale. Thirty years ago the Sud-Ouest community in the city was deprived and struggling. Reso was formed as a grouping of local leaders from business, the social sector, trade unions, community who come together to produce an economic strategy whose primary goal is bringing the area up. Karen Leach, coordinator of Localise West Midlands imagines the transformation of our local economies if local enterprise partnerships has been set up with a similarly inclusive remit. ‘It’s such a missed opportunity’, she says.
The ecological imperative
It could be argued that many of the above approaches tweak and rebalance local economies rather than overhaul them, and are not dealing with the biggest challenge to communities yet – that of climate change. In particular the growth model that has dominated economics for decades and in many cases destroyed livelihoods and communities is still alive and well. Environmental pressures mean that this model is doomed, however, a ‘global suicide pact’, as Ban Ki Moon called it.
Models that move away from growth – or at least ‘bad growth’ – are gaining more traction as economic orthodoxy become incompatible with the world around us. Steady State Manchester’s In Place of Growth report says that neither the government’s Plan A – fiscal austerity’ – or the alternative Plan B – ‘phantom abundance’ – are fit for purpose and has come up with its own Plan C, ‘ecological prosperity’. At its core are redistribution, localisation and wellbeing, with policies to lower wage differentials within public institutions, combat the long hours culture, turn Manchester into a Slow City and create a Manchester green investment bond.
The pressures of climate change and austerity are bringing new imaginative responses to rethink local economies, as Rob Hopkins of the Transition Network sets out, particularly through the localization of food and energy. Reconomy’s economic blueprints show the value to local economies of localising food and energy. The Solidarity Economy in New York is a deeply collaborative model that says it is not enough to create green businesses; instead we have to radically change the way we relate to each other and the purpose of economic activity. The sharing economy is spreading as an idea and solution.
But can any of these models become mainstream? As our macro economy gets back to business after the great recession, what hope is there that local models can break the mould? As Localise West Midlands and Transition Towns have discovered, it is difficult for approaches such as community economic development and localisation to break through to the mainstream.
‘We need to change the narrative from the neo-liberal model that dominates everything’, says Frances Northrop of Transition Town Totnes. ‘Is it possible to get a narrative that’s as simple as the neo-liberal one?’
But the size and scale of the problems facing local economies mean that a return to business as usual is not possible, and even central government is looking for ideas and ways to help boost England’s local economies.
A local economy group has been meeting with the Treasury for the last six months and has come up with a list of asks, from encouraging wider representation on local enterprise partnerships and measures to maximise the local economic benefit of all local spend, as well as strategies that will boost community finance and community energy. The Social Economy Alliance, the Alliance for a Better Economy and the New Economy Organisers Network are all recently formed organisations campaigning for and setting out the case for a new local economics.
It may be burning platforms of austerity and recession that are pushing the need for change but through the process local leaders are realising the benefits of doing things differently. As the leader of Sunderland said of the city’s community leadership programme: ‘It’s a pity we didn’t do this before’.
Credits: All images and content courtesy of New Start