A community powered economy: 3 principles

October 12, 2021  

As the world reels from an accelerating environmental crisis, Adam Lent details a vision of a sustainable economy that has local communities rather than big business at its heart.

Contrary to popular opinion, big business and big government share some remarkable and fundamental similarities. They are both highly centralised with key decisions and activity taking place, more often than not, in central London. They are both dominated by extremely hierarchical organisations. And they are both suffused by a culture which justifies doing ‘to’ rather than ‘with’ local communities. For big business and big government, people are little more than grown-up infants: passively receiving products or public services, their agency reduced to the mere freedom to choose between different brands or providers.

Big business, just like an overbearing state, leave no space for a meaningful notion of community. After all – consumers are individuals, so why should businesses consider anything more than satisfying the demands of the mass of individuals they serve – no matter where they live or what the overall consequences might be of their consumer choices. The result of this is local communities and networks stripped of any collective power over how their local economies operate, what their town centres or high streets look like or even what their own street feels like. At its very worst, it means communities being thrust into decades of poverty and unemployment as large employees preside over ill-paid and precarious jobs, or make ruthless decisions to shift their operations elsewhere.

This reduction of economic activity to nothing more than the satisfaction of the insatiable appetites of individualised consumers has now reached the apogee of its disempowering potential. As the consequences of environmental degradation begin to take hold, we are reduced to spectators of our own destruction – seemingly unable to withstand natural forces beyond our control. Business has plundered nature to offer more and more. The result is the actual physical destruction of some communities, and deprivation and poverty across multiple others.

It is clear that we need a very different conception of an economy: one that values community and agency rather than individualisation and passive consumption of ever-more stuff. This is not only a worthy ideal but an urgent necessity.

So what might such an economy look like and how can it be brought about? I think there are three principles that should inform our thinking and action.

3 Principles for a Community-powered Economy

1. Shifting power from corporate boards to local communities

The big power in our economy resides in the boards of large corporations. Those corporations may constitute less than 0.1% of the total number of businesses in the UK but they account for around 50% of all business turnover. Each one of these very small number of companies have revenues stretching into the tens of billions of pounds and employ hundreds of thousands of people. This is a huge concentration of power.

It is this concentrated power that can make or break a community overnight by deciding to open or shut factories, offices, warehouses and retail outlets. It is this concentrated power that completely reshaped high streets and town centres over the last 50 years, replacing local businesses with chain outlets. It is this concentrated power that generates its income from operations in local communities but then invests that revenue elsewhere, potentially thousands of miles from the community itself. It is this concentrated power that relies on local hospitals to keep their workers healthy, local transport infrastructure to ship their goods and local schools to educate their future employees but then does everything it possibly can to avoid paying the taxes that fund the hospitals, infrastructure and schools.

In other words, the corporate board is the very essence of doing ‘to’ local communities rather than doing ‘with’. No amount of local charity work or apprenticeship schemes can eliminate the fact that the power differential between corporations and communities is vast.

So, the first step towards a community-powered economy is to give local communities much greater power over whether and how large corporations are able to operate in their area.

We need to recognise that corporations who have such enormous influence over a community’s life cannot simply be free to wield that power without permission from those around them, or by abiding by terms established by that community.

Communities may quite justifiably decide that they do not want more high street gambling chains operating in their area and refuse to grant the right to open such establishments. They may accept a new chemical processing factory but with more conditions around local pollution, employee health and environmental sustainability than those provided for at a national level. A community may welcome the opening of an online delivery warehouse but not if it means members of the community being subject to poverty wages and zero-hour contracts. It is surely for the community, not the corporate boards themselves to make such crucial decisions about the future of an area and the people who live there..

More fundamentally, a local community should have the power to develop a clear, consensual vision of the type of place they want to live in and grant businesses the right to operate only in line with that vision. That vision would not be developed by council officers, councillors or MPs operating in a disengaged fashion but through a consensus-building participative conversation, using deliberative techniques that are increasingly being employed at local level.

In essence, such a shift would be a deliberate unwinding of a raft of case law and statute that has developed over the last century-and-a-half, which has incrementally enhanced the rights of large corporations to the point where we now take such power for granted. But the fact that it is rooted in case law and statute shows that there is nothing natural about this power – it has been deliberately created (often in the face of great controversy at the time) and can also be deliberately withdrawn.

2. Encouraging Local Not Global Business

The second plank of a community-powered economic model would be a major shift towards favouring smaller, locally owned businesses over large, global corporations owned by major shareholders. This would be a complete reversal of the trends of the last 50 years but it is a vital imperative.

Local businesses are more likely to circulate their revenue within the local community in which they are based by employing local people, buying from local suppliers and investing locally. Corporations by contrast will use whatever revenue they generate from a local community in any way they see fit: paying employees far outside the local community, buying from suppliers on the other side of the world, distributing profits to international investors and squirreling away surplus in ‘tax efficient’ locations. One American study found that, on average, 48 percent of local independent businesses revenue was circulated locally, compared to 14 percent of chain stores revenue.

In addition, local businesses are less mobile. Its owners may have a close personal identification with a local area but, more importantly, they simply don’t have the funds or infrastructure to make the decision to open, close and move operations in the same way large corporations do.

In those senses, smaller local businesses are truly rooted in their communities and their futures in a way global corporations rarely are. And people are happier spending their money with local businesses, a trend accelerated by the pandemic.

The community-wealth building movement is playing an important role in this shift at local council level but really significant change means a big reform of central government policy, which has very strongly favoured large corporations and the big investors that back them. Tax incentives would need to be used widely to support locally-owned businesses and those who invest in them. The cost of such incentives could be funded by higher taxes on large corporations and their investors.

Local councils could be required to develop planning and economic development strategies that favour the local and the small, using funding from devolved tax-raising powers. Groups of councils could be supported to establish regional and local banks to invest in those businesses. Consumers could be incentivised to buy from local businesses through strong government backing for local discounting schemes. And the power that a well-crafted and consistent message from central government about the need to support local business should not be underestimated in changing consumer and investor behaviour.

3. Focusing on Community Rooted Well-being Not Industrial Productivity

The final plank is to shift away from the cult of productivity that currently shapes economic policy and business practice, towards the recognition that once an economy is producing enough for people to live comfortably, the next task is to ensure improved well-being and an enhanced sense of agency beyond solely material needs. This is an idea already gathering pace amongst economists outside the mainstream. The key additional insight of a community-powered economics is that greater well-being and agency, to be meaningful, must be rooted in a more powerful local community.

The endless search for ever more efficient business which maximises revenue and minimises costs is a mindset that develops directly out of the reign of the vast corporation which has to constantly deliver quarterly profits to its investors, while struggling to survive in the hyper-competitive world of global markets. It is a mindset that is endlessly seeking ways to replace expensive employees with cheap technologies. When it can’t do that, it drives down the wages and conditions of those employees: regularly ripping the confidence and hope out of communities. It is this mindset that ruthlessly thrusts whole areas into poverty when those cheaper employees or technologies are to be found elsewhere. Efficiency and profit mean everything in this frame; well-being, a sense of agency (beyond that of the infantile, insatiable consumer) and the importance of community mean nothing.

By contrast, an approach that aimed to generate well-being and fulfillment rooted in local community would have a very different way of working. Rather than maximising working life to enable the expansion of material wealth well beyond what people actually need, it would look to improve the experience of work while increasing the time people have outside of their job to engage in other activities by encouraging job-sharing and reduction in working hours. Rather than investing in the development of pointless luxuries, ludicrous marketing schemes and endlessly minor changes to perfectly adequate products, it would invest in making genuinely needed products cheaper, accessible to all and more sustainable. Rather than glorifying endlessly growing material consumption and the commercialisation of every aspect of human life, it would value more meaningful activities rooted in genuine, non-transactional relationships.

Importantly, this would require a deep revaluing of the local and the community. It is there that so many of those more meaningful activities and non-transactional relationships can be found. It is here that friendships, networks and associations can be built focused on sport, art, nature and a huge range of other activities. This would be provided not by the inauthentic profit-seeking of corporations but by what the social theorist Ivan Illich, called “conviviality” – the processes by which communities connect, support, enjoy and spontaneously build relations of interdependence. Notably, Illich specifically described this conviviality as the “opposite of industrial productivity”.

What About Living Standards? What about Growth? What about Innovation?

Any conventional economists who have bothered to read this far will doubtlessly be screaming at their computer screens. The vision outlined above is the sort of thing they detest. Their world-view is based very firmly on the idea, first developed by Adam Smith, that the great gift of industrial capitalism is the process by which a competitive free market forces endless innovations in productivity, thus growing wealth and making everyone richer and happier over time. They point to the fact that since the industrial revolution the average global income has grown by ten times, vast amounts of surplus have been generated to invest in healthcare and education and we have all manner of technology now making our lives easier and more exciting. Giving up on productivity and growth is to give up on all that, to risk stagnating or worse going backwards as foreign firms out-compete domestic businesses.

For this reason, conventional economists not only hate any perspective that challenges the importance of productivity but they also hate small, local businesses which tend to be less productive and less subject to the most intense forces of market competition than the big corporations. They have an awkward word for what small, local business does which is usually spat out with derision: ‘satisficing’. Satisficing describes the behaviour of businesses that don’t grow and don’t drive productivity not because they can’t but because they don’t want to or don’t have to. They’re happy just doing what they do. Satisficing, in the minds of conventional economists, is the enemy of greater wealth and higher living standards.

All of this maybe had some intellectual cogency to it until around 30 years ago when it started to become clear what this endless, productivity-driven growth was doing to the natural world. Once you get beyond the abstract way economists tend to talk about growth, what it actually means fundamentally is an explosion in the extraction, processing, consumption and disposal of natural materials: a rise from around 8 billion tons of material in 1900 to around 90 billion tons today. The most notorious of these materials is, of course, fossil fuels, and the contribution their use has made to global warming. But the explosion of use of a wide range of other materials such as timber, potassium and nitrogen have been assessed by an influential analysis to be damaging the environment in no less than nine ways including species mass extinction, rapid ocean acidification and destruction of natural animal habitats as well as climate change.

As Vaclav Smil, a professor who has dedicated his career to studying material use, put it:

“.. in order to reconcile our wants with the preservation of the biosphere’s integrity we will have to make deliberate choices that will help us reduce absolute levels of material consumption, and thereby redefine the very notion of modern societies whose very existence is predicated on incessant and massive material flows.” (From Making the Modern World)

In this context, it is not those who might seek to stem productivity-driven growth who are the dreamy economic illiterates they are so often portrayed as, but the conventional economists who persist with the patently illogical idea that a planet of limited natural resources can sustain an unlimited and accelerating expansion of the use of natural materials. Recognising the strength of this argument, a number of those conventional economists now claim that it will be possible to ‘decouple’ economic growth from material growth. But this has never happened in the past and, as Smil himself has explained in considerable detail, is not happening now in any meaningful way.  The data is simply not on their side and such claims only reinforce the impression of a refusal to face up to a well-evidenced reality. Ironic, given economists’ predilection for presenting themselves as hard-edged, unsentimental realists guided solely by the evidence.

So, far from being a threat to the advance of human civilisation, a community-powered economy as outlined here would actually be a major contribution to saving human civilisation from rapid decline and possible destruction. Indeed, given the likely severity of the negative impact of the environmental crisis on economic growth itself, developing an economic strategy that no longer relies on that endless growth would seem a far-sighted precaution.

None of this should be taken to mean that we should overlook the fact that very many people under-consume rather than over-consume. A community-powered economy would still require intensive efforts to raise the standard of living of a society’s poorest and their communities. But these efforts cannot be based on the widely accepted ‘rising tide lifts all boats’ approach of free market economics which sees the universal expansion of wealth through enterprise – and hence the unsustainable expansion of material use – as the best way to eliminate poverty. The only alternative is to share current or even reduced economic output more widely, meaning policies that ensure higher incomes for employees, a more equal distribution of wealth and forthright measures to reduce regional inequality.

What can local government and public services do now?

Clearly, this vision requires a set of radical changes well outside the current limited powers of local councils and public services in the UK. So what, if anything, could be done at local level now to move at least some way towards a community powered economy? There are, I think, a number of possible activities which can be broadly grouped together under the following headings.

1. Focus on deepening the local economy and well-being

Under the current system where so much economic power resides with big business and the centralised state, no local authority can avoid trying to attract their investment. However, there can certainly be a significant recalibration of policy and effort so that the strengthening of local markets, local investment and local business becomes as, or possibly more, important than seducing the big national or global players.

Community-wealth building has offered one important route to this by emphasising the role that local public sector institutions can play by purchasing locally and paying their employees above the living wage. But this needs to be expanded much further into the sphere of proactively creating local markets through:

  • The encouragement and incentivisation of local purchasing by all public, commercial and household consumers;
  • Investment and support for local businesses;
  • The creation of local infrastructure in the form of transport networks, internet access and physical space to enable local consumers and local vendors to connect;
  • Offering locally owned, independent businesses advantages not made available to national or global corporations such as discounts on council services and charges and extra advice and practical support.

This work needs to be seen as a drive to improve local economic well-being rather than the more conventional aim of creating maximum growth. That means as much of a focus on ensuring decent pay and conditions, expanded leisure time and affordability of necessities as on creating full time jobs at any cost. This may lead local authorities to develop plans for greater job-sharing, making support for local business conditional on decent treatment of staff, and focusing on developing local businesses and markets that serve the ‘foundational economy’. Such concerns should trump efforts to drive up productivity or develop faddish ‘innovative’ sectors such as automation and AI.

2. Build a Local Movement for Economic well-being

Economic development and regeneration as a council function is often regarded as extremely technical and complex, particularly where it intersects with the legalism of planning departments. But the building of a community-powered local economy requires the ditching of such insularity. The more economic development can be made the concern and work of a whole community the better. A shared mission needs to be created that regards local economic well-being as the responsibility of all. It is out of such cultures that new businesses emerge, that consumers look to local producers and that new opportunities for improved economic well-being are generated that could never be conceived inside a council office.

This means using all the tools of participatory and consensus-building decision-making to involve all parts of a community in developing an economic vision for a local area and maintaining engagement as that vision is implemented. It means developing a clear, simple narrative built on that vision and consistently and persistently communicating it to the local community. It means the local state often stepping back and letting other local bodies with greater legitimacy lead the communication of the narrative and the associated changes in behaviour.

3. Connect, Collaborate and Campaign Across the Public Sector

Once any public servant understands that their role must be more than simply providing an emergency response to personal crisis and instead must be preventing crisis in the first place, the importance of local economic well-being becomes very clear. So much of the challenge that the local state deals with day-to-day such as ill-health, family breakdown, isolation, crime have their origin in economic failings: poverty, poor housing, unemployment, low pay. Addressing those problems with a community-powered focus on local economic well-being would be the obvious centrepiece of any genuine shift to a preventative model.

But the imposition of short-term targets and rules from above means that powerful local bodies such as hospitals, councils and schools struggle to work together to address the underlying economic causes of personal crises. Equally, a siloed, self-interested mentality that permeates those same institutions only deepens the problem.

Thus, there is a strong imperative for local public sector bodies to join a local movement of residents and businesses for a community-powered economy and pool their powers and resources, move beyond their siloed, acute response mind-set and help deliver greater local economic well-being jointly. This may mean stepping outside the boundaries set by central government on public sector operations, but that is precisely where a cross-organisational movement across a place can come in useful, and present a united front against central government dictat.

Radical Solutions for Radical Times

All of this will sound insanely radical to the scions of Westminster and Whitehall schooled in the principles of conventional economics and the imperatives of retail politics. But such reactions say more about the conservative culture of the Westminster political class than it does about the depth of change required to meet the vast challenges we now face. The unlimited, corporate-led growth in material consumption that Westminster sees as an inherent good is literally destroying the conditions for the sustenance of life. That destruction is not some future threat anymore, it is here, happening now. Nature is already imposing radical change upon us whether we like it or not and our response needs to be consequently radical as well. Creating an economy where businesses serve and sustain local communities rather than conquer the world, and where those same communities find meaning in their own interdependence rather than in the endless consumption of material, must be a central part of that radical response.

Find out more about community power.

Photo by Graham Knott on flickr

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