Is Community Wealth Building a solution to local deprivation in poor countries as well as the UK?

January 14, 2020

     By Duncan Green     

Recently, I’ve been reading up a bit about social change in the UK – I’m wondering if I should embark on some kind of ‘How Change Happens on my doorstep’ project. The stuff I’m finding is both familiar and different to what I’m used to.

Take Community Wealth Building, for example, which is all the range among UK activists looking to kickstart local development in depressed areas. A recent paper from the Centre for Local Economic Strategies defines it as ‘an intentional reorganisation of the local economy in order to tackle inequalities and disadvantages’.

At the heart of the CWB approach are local ‘anchor institutions’, often public sector outfits like NHS hospitals or universities. These can use their leverage over jobs and procurement to boost the local community and economy. It’s a bit like a local industrial policy, but with the anchor institution taking over the role of a national government.

Anchor institutions and local authorities support progressive local sourcing of jobs, goods and services, by promoting living wage employment, and worker and community ownership that challenge conventional business models. They boost capital availability by channelling local authority pension funds and supporting the establishment of local credit unions and community banks.

‘By adapting their procurement processes and decision making, anchor institutions can create dense local supply chains and ecosystems of local enterprises, SMEs, employee owned businesses, social enterprises, cooperatives and other forms of community ownership. This is important because these types of businesses are more likely to support local employment and have a greater tendency to recirculate wealth and surplus locally and help to reduce carbon footprint.’

There are dozens of experiments across the UK (see table), but when it comes to CWB, all roads lead to Preston, a city in Lancashire, in the North of England:

‘In 2011, post global financial crisis, some development and inward investment activity within Preston had slowed down, with little hope of being rekindled. With little funding or capacity to prioritise traditional regeneration, Preston needed to think and act creatively. The City Council, working with CLES, began to explore ways to apply community wealth building ideas locally. The starting point was to reach out to engage the city’s anchor institutions.

CLES and the City Council began working with six of the city’s anchor organisations. This work identified that, of the collective £750m spent by those institutions procuring goods and services, 5% was spent with organisations based in the Preston boundary, with 39% spent with organisations based in wider Lancashire (including Preston). Over £458m was leaking out of the Lancashire economy. For each area there was scope to ‘repatriate’ spend (i.e. where there was a quality local supply base). Following consistent work by Preston City Council’s leadership and CLES with procurement and with potential suppliers, we have seen some increase in local spend. Across the institutions, 18% of all procurement spend is now with Preston-based organisations. Spend in Lancashire has increased from 39% to 79%, an increase of some £200m.

As well as retaining money in the area, the work has also supported other forms of economic democracy and community wealth building. This includes capitalising on existing links between the University of Central Lancashire and the Mondragon network of cooperatives in Spain. Preston has now created the Preston Co-operative Network, along Mondragon lines. It is currently working to not only turn existing social networks into cooperatives, but to identify gaps in the local market where co-ops could be created to supply some goods and services locally.

Preston are also working to bring even more democracy to the local economy by establishing an energy supply partnership, seeking to establish a community bank and actively looking for further opportunities for local investments by Lancashire’s Pension Fund. For Preston, the work continues to mature and deepen and they are increasingly collaborating and sharing their experiences with other local authorities.’

Aditya Chakrabortty has a lovely podcast with one of the founders of the ‘Preston Model’, if you want more.

I guess economists might argue that this is tantamount to balkanizing the economy into lots of separate bits, reducing scale efficiencies etc. But in deprived areas where wealth and hope are being siphoned out to the already affluent areas, driving up inequality, that is surely a price worth paying.

In all the screeds I’ve read about industrial policy in developing countries, I have never seen a reference to anchor institutions or CWB. So, is it happening there as well (perhaps under a different name)? Or is it dependent on having relatively well funded welfare states to provide the anchor institutions? If it is happening, what are the similarities/differences with the UK? Which organizations play the role of anchor institutions? Would love to know more.

January 14, 2020
Duncan Green