Making community economic development mainstream

What are the benefits of community economic development and how can it become more mainstream? Localise West Midlands has been finding out.

As reported in New Start last year, thanks to a small Barrow Cadbury Trust grant Localise West Midlands has been researching how localised and community economic development can be integrated into the mainstream to help create more successful, socially just and diverse places.

Its first stage was a review of the literature evidence for the benefits of localised economies in comparison to more centralised economic approaches. There’s nothing new about localised economic approaches or writing around their social benefits, so we assumed this stage would be a quick overview of relevant existing analysis as context for the primary work on ‘mainstreaming’. In fact we found little direct assessment of different economic approaches, with our review being one of the first to collate evidence around the socio-economic benefits of economic localisation strategies.

Whilst there were inevitably numerous gaps in the research, the review identified significant evidence that local economies with higher levels of small businesses and local ownership perform better in terms of economic success, job creation (especially in disadvantaged and peripheral areas), local multiplier effect, social inclusion, income redistribution, health, wellbeing, civic engagement, local distinctiveness and cultural diversity than those more dependent on centralised economic actors. This in itself was one of the strongest outcomes of our work, providing an evidence base for the rebalancing towards indigenous activity that many have called for, and a basis for further research exploration.

WHAT IS COMMUNITY ECONOMIC DEVELOPMENT?
For this work we collate two conventionally separate localisation concepts under the term Community Economic Development (CED). Adapting from a Canadian definition, where CED is a more developed and strategic concept than in the UK, we define it as economic development led by the community and based on local knowledge and action, with the aim of creating economic opportunities and better social conditions locally. But we include in this not only voluntary sector initiatives with social objectives, but also private sector activity that is locally controlled and based, where the community’s participation is as owners, investors, purchasers and networkers. Our case studies reflect these different types.

Both the literature and our case studies suggested that a local economy largely controlled by distant public and private sector decision-makers – effectively ‘absentee landlords’ – is a recipe for economic failure in the long term. Absentee landlords have neither the local knowledge nor the local commitment to make appropriate decision, and with little ties to a place such businesses can ‘jump ship’ in pursuit of better conditions. The result is a more difficult environment for local businesses and a self-reinforcing cycle of decline.

In the reverse, virtuous circle, a higher proportion of locally based business owners are involved in decision-making and locally based businesses are more likely to adapt to local needs than to move. Employment may be more accessible; there are more opportunities for more parts of the community to have a stake in the local economy, through peer experience, through the wider distribution of owners and managers, or more formally through co-operatives; and the overall increase in civic welfare reduces disadvantage in a way that overall ‘growth’ per se often fails to. Other benefits come from the overt social inclusion agendas of many social enterprises, and from private sector managers who understand the business case for developing a strong locally-linked economy around them, and even a socially inclusive one.

Many of our recommendations for integrating such success into mainstream economic development at local level (see next page) will be familiar; they are approaches that have been promoted and supported for example on procurement, high streets, local multiplier, for years, and have been part of economic development strategies for longer. But even by sympathisers it is often still seen as irrelevant to ‘real’ economic development, in which ‘big is best’ maintains its hegemony. To enable community economic development to scale up its contribution requires change at national level to decentralise economic power. Changes are needed around policy, support services, subsidies, banking and infrastructure to ensure that CED and indigenous economic activity has a level playing field.

With widespread public concern over concentrations of wealth and power that resulted in the 2008 crash, and the need for more and better livelihoods to escape the recession, could CED be a new political point of interest for politicians and civil society?

HOW TO MAKE COMMUNITY ECONOMIC DEVELOPMENT MAINSTREAM

• FOCUS ECONOMIC DEVELOPMENT ON RELATIONSHIPS, partnerships and networks, the strategic importance of the collective small scale; maximise local power rather than that of absentee landlords

• INVOLVE PUBLIC, PRIVATE AND VOLUNTARY SECTORS IN CREATING A SHARED LONG-TERM LOCAL ECONOMIC VISION with socio-economic objectives

• IDENTIFY LOCAL INDIVIDUALS with a commitment to the local economy and social inclusion, and locally-based businesses including SMEs and those operating in deprived areas, and give them a significant role in economic decision-making. Amass and share good market intelligence

• Identify priorities based on seeing the ECONOMY AS AN ECOSYSTEM which needs a balance of sectors, business types and functioning networks; create and strengthen organisations which help develop supply and demand chains and horizontal social capital

• USE PLANNING, REGENERATION, FUNDING AND SUPPORT SERVICES IN LOCALLY RESPONSIVE WAYS; assess regeneration proposals for their impacts on existing supply networks

• Identify and pursue the specific conditions needed for INWARD INVESTMENT TO BRING LONG-TERM BENEFITS

• Form CLOSE TIES BETWEEN ECONOMIC DEVELOPMENT AND PUBLIC PROCUREMENT to achieve more within limited budgets

• Seek DECENTRALISED AND LOCALLY RESPONSIVE FINANCE accessible by local and small businesses

• Find ways of MEASURING AND EVIDENCING THE SOCIO-ECONOMIC BENEFIT without creating undue burdens for the SMEs and other organisations it seeks to support. Using local business success as a proxy objective is inadequate to achieve social goals.

CASE STUDY: BIRMINGHAM WHOLESALE MARKETS
Towards the end of our research, Heseltine’s No Stone Unturned report was published and is now piloting in Birmingham. Some of the Heseltine agenda resonates with our findings – an emphasis on locally tailored business support services, for example – but with draughty holes through which socio-economic outcomes could easily fall, such as an absence of social inclusion objectives or champions, and potential domination of decision processes by ‘absentee landlords’ rather than locally committed businesses and communities. Birmingham has also undertaken an excellent Social Inclusion Process with sound recommendations for an inclusive economy – perhaps the two should relate more closely to each other.

As one example, the dominant business agenda seeks the removal of Birmingham Wholesale Markets from their central site to one at the city’s edge – see our blog for more details – to free up this prime site for redevelopment. The markets have an aggregate turnover of £275m, with 73 trading operations (all but two are locally owned) employing 1,100 people. Supplying the city’s independent food businesses, they support around 15,000 jobs in the wider local economy, employment of disadvantaged people, remarkable cultural and social diversity, and affordable and accessible fresh food, particularly through the adjacent retail markets. If the markets move, will this central site – under the control of an absentee landlord seeking high returns – provide a similar local multiplier or socio-economic benefits? Can the wholesale markets continue providing all these benefits if relocated to the city’s outskirts? What methodologies allow us to compare the real impacts of such options? What would be the view of Birmingham’s locally-based businesses and their customers and investors on this – and are they being heard?

• For more about Mainstreaming Community Economic Development see the project webpage.