How strong local economies & community economic development really contribute to social inclusion – LWM research findings

As outlined in a previous Fairbrum blog, Localise WM is currently working on a research project, Mainstreaming Community Economic Development (CED), funded by the Barrow Cadbury Trust. The first stage has been a review of existing literature to identify whether CED, localised ownership and supply chains create more social and economic inclusion, diversity, local distinctiveness and income equality than more mainstream, centralised economic development approaches. This is clearly relevant to Birmingham’s Social Inclusion Process so we have been aiming to cross-pollinate between the two projects as both have progressed.

This review can now be found on our website – and we’ve tried to summarise its lengthy findings below. Apologies that this is a little long for a blog post!

To outline what we mean by the terms we’re using – community economic development is led by people within the community and based on local knowledge and local action, with the aim of creating economic opportunities and better social conditions locally.  Economic localisation involves local ownership or control over economic activity; with an emphasis on local supply chains and local market opportunities.  Our objective was very much to explore the two as different facets – the purposive and non-purposive – of a more localised approach.

The outcomes we are interested in are social and economic inclusion; income equality – both distribution of wealth amongst individuals and also how wealth is distributed geographically; and diversity and distinctiveness.  We consider diversity and distinctiveness to have value in their own right through contributions to sense of place and belonging, area quality, added interest and richness of experience in comparison to homogenisation.  More practically, diversity means that there are more different products and services, organisational structures, types of work, roles, shapes and sizes of economic activity to suit a greater diversity of human beings, and increases resilience in comparison to ‘monocultural’ economic development.

The concept is an economy in which, simply, more people have more of a stake.

Findings

We found less evidence directly around our socio-economic outcomes than expected, and a tendency to make assumptions on such impacts, but what can be concluded is as follows.

Benefits of localisation and CED

The literature review concluded that localised and community economies seem to deliver better than centralised on job creation, particularly in disadvantaged and peripheral areas, on resilience, stability and economic returns to an area, quality of life, security (for the workforce), civic welfare, civic participation, local economic power, accessibility of employment opportunities particularly for people who are vulnerable to economic exclusion.  The role of social enterprise (a CED tool) in addressing areas and communities of disadvantage was also well documented.  All this has a potentially positive knock-on impact on inclusion and equality.

While more centralised large-scale approaches can bring extra resources and powers to make an immediate difference, it seems that they can then undermine the local virtuous circle and long-term prosperity of a local economy, potentially contributing to social segregation and inequality.

The review was less conclusive on some other issues including the impact of localised and community economies on accessibility of goods and services.  Localised economies seem to increase physical accessibility – for example in accessible high streets, markets and the survival of small local shopping centres – but point of purchase costs may be higher in some cases, leaving aside the issue of externalised costs.  It is clear that centralised retail  – such as supermarkets and separate malls and centres – has reduced high street diversity and product ranges, and there also seems to be a positive impact on product diversity from revival of local and small-scale enterprise; but more research is needed around this.

The review was also less conclusive on direct income equality impacts.  There was evidence that centralised and remotely owned economic development deliver better pay and formal conditions than localised economic development, but also that regional income disparities can be exacerbated by Government economic development spending based on over-estimates of benefits from any resulting inward investment.

It remains persuasive that a model of economy which is driven by remote shareholder value above business longevity, which encourages mergers and their resultant labour-shedding, and which concentrates economic power in few hands, is likely to create more income inequality than a decentralised economy driven by local profitability, with local or employee ownership and with the priorities of local economic decision-making.  But little evidence is available, and centralised and decentralised approaches can both vary in their impacts on income equality.

Few people seem to have assessed the what socio-economic benefits are brought about by public subsidy to different types of economic development either, which is a serious oversight. Policy on public subsidy seems to pursue centralised, large-scale economic activity based on assumptions without considering options around the collective impact of more small-scale activity.

In summary…

Whilst many evidence gaps remain, given their proven benefits, we need a revaluation of how we balance and integrate localised and centralised economic approaches in economic development practice and policymaking if it is to tackle social inclusion.

Localisation and community economic development approaches have long been seen as secondary to the ‘main business’ of inward investment-seeking, centralised strategies; in self-fulfilling prophecy style, this has governed the resources, attitudes and powers that have been directed to them, and thus the results they can achieve.

So we need to seeking to ensure that different options are fully considered as part of decision-making and used when they are the best option, and to work on models and policies that ensure these benefits are maximised and that any potential disbenefits are minimised.

Making it work

There are lots of lessons here for economic development in Birmingham. As with most strategies, local and community economy approaches should be used as a tool to deliver socio-economic benefits in a way that assesses likely outcomes and monitors real outcomes for those benefits rather than using, say, small business development as a proxy.

Key to a successful local economy is the ability to make economic and political decisions locally  and effective public/private sector working.  Also key is good understanding and innovation around how businesses interrelate: both the networking of small businesses and linkages with economies that transcend the local; and ‘bridging capital’ (open to other areas, well networked, inclusive) and ‘bonding’ capital’ (bringing together different stakeholders in the area to act in unity).  Local business networking can provide the benefits of scaled-up product and service offer – and sometimes efficiencies – while maintaining the benefits of local autonomies and diversity.

Effective strategies are likely to involve incorporating conventional economic development, local sourcing approaches and CED approaches more closely.  Conventional economic development should become more open to community influence, more sensitive to local needs and resources and better incorporating socio-economic goals into its decision-making.  Public and private sector bodies should enable and respond to CED approaches.  CED approaches should become more strategic and focus primarily on the mainstream economy delivering their goals; and local sourcing initiatives should incorporate CED objectives to avoid the potential for exclusive approaches.

Next steps

Our next steps for the Mainstreaming CED project are to identify how beneficial approaches can be further mainstreamed.  For this we are investigating case studies such as Birmingham Wholesale Markets, Sandwell’s food strategies and retrofitting initiatives, and developing a workshop to be held in the autumn. In the future we also plan to fill some of the many gaps in research that would develop a sounder evidence base of where and how localisation and CED approaches are effective in delivering inclusion, income equality and diversity.

We will also be using our findings in responding to the forthcoming recommendations from the Social Inclusion Process!

Let us know if you would like to be on the project mailing list.

Karen Leach
Coordinator
Localise WM

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