Category Archives for "Local Economy"

3 A Case Against Altruism

Some people find they are able to practice altruism, at least on occasion. I suppose soldiers on the battlefield are altruistic. The problem is you cannot build a society on altruism.

You may have gathered I am a theologian and apologies to those who are not religious but I want to show how the roots of my views about self-interest and altruism are in the deep past. It’s what people have believed for thousands of years. Some people will remember words from the Christian New Testament: “We ought to lay down our lives for one another” (1 John 3:16, NRSV). This is something religious people aspire to but it is not the main thrust of Jesus’ teaching or indeed of other religious traditions.

In various places Jesus teaches the second commandment, “You shall love your Neighbour as yourself” (eg Mark 12:31, NRSV). I remember Mrs Hayes, my teacher at Junior School, who told us that with the first commandment this means we must love God first, other people second and ourselves third. We are permitted to love ourselves it seems but third.

This is of course nonsense. The second commandment is about mutuality. Remember mutuality is understanding that when I work for the benefit of others I benefit myself. The point Jesus makes in this second commandment is not that I come third but I am one of the neighbours I love. From God’s perspective we’re all the same. There’s no third tier of love occupied solely by me!

The word used to describe this love is self-interest. It is the basic value underlying mutuality. Maybe sometimes altruism, giving of my entire self for the benefit of others is important. It makes for inspiring stories but in the regular day-to-day world it is self-interest that benefits all. It is not the same thing as greed.

Greed is where the powerful act solely in their own interests without accountability. Listen for it in the mouths of politicians and directors of industry. They genuinely believe taxation is evil, that supporting the weak through the state is a waste of money, that deregulation benefits the economy …

But pure altruism has its down-side. You can’t build a society on it, unless you need soldiers to fight wars. Here are some of the issues:

The local economy is where we act out our commitment to the values of self-interest. In a disadvantaged local economy, our opportunities to act out of self-interest are limited. When it thrives we are able to collaborate and increase general wealth.

Those who tell us that the economy is essentially competitive are not participating in the economy. They are predators in sheep’s clothing who do not care for the benefit of all.

So, self-interest is a core value but there is another one, about which I shall write next Monday.

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1 Self-Interest and Altruism

Last Monday’s post asked, is it possible to rebuild the local economy? Despite the views of some politicians the truth is many voluntary sector organisations and churches work with private businesses. These relationships do not always work because values clash but there are examples of collaboration between these sectors.

Imagine a spectrum with greedy grasping capitalists at one end and selfless or altruistic saints at the other. Both ends are unreal.

The grasping capitalist is closest to the 1%, the directors of the corporations who draw wealth from local economies. They are responsible for the collapse of the global economy (and will be again soon it seems) and environmental damage. They do this through deregulation which skews the economy in their favour.

Starry-eyed people occupy the other end of the spectrum.  They genuinely believe it is possible and desirable to act solely for the interests of others.

Self-Interest

Most of the rest of humanity is somewhere in-between and motivated by self-interest. When I work for the benefit of society I do so for my benefit. If society benefits through my work, so shall I because I am a part of society.

The corporations want us to believe everyone is essentially selfish and so wants to pay lower taxes and make fewer contributions to general well-being. Another way of  increasing tax revenue and so to benefit society is  to increase wages but big business doesn’t like this solution because it will cost them a lot more.

I don’t see why volunteers should not be paid; they can always give away their excess. We earn for the benefit of  ourselves and others; pay the state to provide some of that benefit and can choose to contribute to causes not supported by the state.  But this works where people earn enough to be able to freely exercise these choices.

I’ve made a case against the greed of the banks and corporations, supported by our political élite.  Next Monday I shall explain why altruism does not explain why people work for the local economy.

1 Is it Possible to Rebuild the Local Economy?

In the last few Monday posts, I’ve defined the local economy. Before I move on I want to ask whether it is possible to rebuild the local economy.

On Saturday 4 October 2014, the Guardian newspaper ran an item on its front page, “Outcry as Osborne rails against ‘anti-business’ charities”. The chancellor of the exchequer addressed the annual convention of the Institute of Directors and said,

“You have to get out there and put the business argument, because there are plenty of pressure groups, plenty of trade unions and plenty of charities and the like, that will put the counter view. It is, I know, a difficult decision sometimes to put your head above the parapet, but that is the only way we are going to win this argument for an enterprising, business, low-tax economy that delivers prosperity for the people and the generations to come.

There is a big argument in our country … about our future, about whether we are a country that is for business, for enterprise, for the free market.”

I doubt the Chancellor would recognise a free local market even presented to him on a golden platter with watercress tastefully arranged around it.  So, let’s deal with some of the myths in his statement.

Deregulation

The Institute of Directors are hardly equipped to make the case for small businesses and the local economy. They are not primarily pro-business in the sense of free trade and a level playing field for small businesses. The corporations skew the economy to the interests of the 1% who accumulate wealth and so take it out of the economy. They are not behind the parapet; they are the owners of the big guns that over the last few decades have blown the parapet away.

The Chancellor mixes all manner of things together. Of course we need enterprise and business and we need a government that allows businesses to develop on a local scale. The great corporations are not businesses as we know them locally and his eliding of economic imperialism with entrepreneurship is not honest.

The low-tax economy again betrays the prejudice against the entrepreneur who builds wealth for the economy and not personal gain. Why should we not pay taxes? Why shouldn’t the success of my business benefit others?  There was a time when business owners genuinely saw their role as benefiting wider society.  Granted they exploited their workforce but they also aspired to be public benefactors.  I think they used the wrong means to the right ends.  They exploited their workers because they believed they could benefit society from their own efforts.  It was the mutuals that actually built the institutions that created modern Britain.

Whilst we need to be for business and enterprise, the idea of the free market is the get out clause for the corporate world. Their watch word is deregulation because their free market allows them to extract wealth from the economy.  All the major political parties in the UK support deregulation, as an unquestioned good.  It shows the rhetoric of national sovereignty, beloved of the new right, is a sham.  Why care about sovereignty when you’ve sold the power to regulate to the corporations?

Mutuals

A regulated economy, creates the spaces where small business can thrive. Mutuals for example need regulation, so that the work of their members builds wealth for the members together.

Which brings me to the point: can we rebuild our local economies? In the middle to late 19^th century, the co-operative movement, a grass-roots movement did it. I’ve written about how so many of the institutions, now owned by corporations, originated from working people who built them as expressions of mutuality.

We know it is possible. The question is whether modern corporations are too powerful. The answer lies in the self-destruction at the heart of their practice. They’ve built their world on debt and we are it seems a hair’s breadth away from a second collapse of the global economy. The Chancellor has not learned the lesson (nor the opposition) but the people sense something is wrong. The popular answer in the UK is UKIP who, whilst identifying some of the issues, have not found solutions that can possibly work.  They are fixated on Europe, where the local economy has many allies, and do not understand the UK government has lost far more sovereignty to privatisation than it has ever lost to Europe.

We will get the politicians we need when we understand the economy we need. This will arise when we have entrepreneurs whose values line up with a new vision. And it is to values I’ll be turning next.

0 More Reasons Why the Local Economy is Important

Last Monday I suggested large corporations reduce wages and use fractional reserve banking to extract value from the local economy. Today I cover why the local economy is important as an alternative to the neo-liberal economy.

Builds Community

The local economy builds community by developing relationships within a neighbourhood.  Does anything increase community in a neighbourhood more effectively than the local economy? What are the alternatives? Community and possibly faith related activities? Most community activity is for particular groups with shared interests; parents of small children, young people, the elderly are perhaps the most common. These activities exclude those who do not meet their criteria. Whilst there can be community forums for all residents in a neighbourhood, these will be occasional meetings. A strong local economy will be where the neighbourhood mixes and can do so for several hours most days of the week.  It is trade and other transactions that take place in a space everyone recognises that most effectively builds community.

Marketplace

The Local Economy as a marketplace at the centre of the community is a natural focus where people can meet friends, share experiences and encounter new activities. The place for voluntary activities is in the marketplace. It makes sense to plant what you’re doing in the place where people pass by. Community development needs to focus not so much on projects based in designated community centres, as participation in the already existing economy. We need imagination to do this. How can local traders take part in community development? Using online and offline methods how far could traders collaborate in building their trading centre as the heart of a distinctive community? How can traditional community activities be a part of the local economy?  Are there projects, eg a community café that might support local traders by drawing more people into the area?

Employ Staff

The local economy is where small businesses employ and support staff. I remember my father’s small business and the struggles he had to find and retain good staff because he could rarely pay them enough. He was a lifelong socialist and mortified to find himself on the wrong side of the unions. The reality is many small businesses in the UK struggle to pay the living wage.

Small Traders

The local economy is where small traders are in business because they are passionate about what they are doing. Whilst they would be delighted to generate more money than they need, many are content to continue to do what they enjoy with a low-income.  If they can generate enough income, the strengths of these businesses are in the business owner’s vocation.

Experimentation

The local economy is diverse with many small businesses and so will see rapid turnover. People will have confidence to try new things and will move on after a few years for many reasons. But a robust local economy will survive the failures. A small business closing will not destroy the local economy in the same way the closure of one major business.

Identity

Small businesses together contribute to making an area distinctive, a place to visit simply because it is good to be there. The big retail corporations have made town centres up and down the land practically identical. Now they are pulling out, leaving loads of empty shops no-one can afford. Meanwhile small shops in the suburbs or in small towns can do well. Where the rates are low and reputation draws people, small businesses can provide specialist stores and services. It helps if there is a major attraction but it need only be a park or a riverside walk.

Conclusion

Perhaps none of this is new but it is radical because the local economy rarely features in the practice of development workers. There are exceptions but a systematic community development approach to the local economy is overdue.

I’m hunting online for community development approaches to the local economy. As I find stuff I will share it.  Do let me know if you are aware of blogs or websites about the local economy.

4 Why is the Local Economy Important?

As a community development worker for over 30 years, I have seen many community audits. Very few even mention the local economy; it seems to be a blind spot in the world of community development. Why is this? How can we bring about lasting change for the better without developing the local economy? The alternative is dependence on grants or mainstream funding; with the recession these are less of an industry than they used to be. Grants and mainstream funding are dependent on decisions made by people who live and work outside of the applicant community. The big advantage of the local economy is it is something to which local people contribute; they do not need permission.

I have written several posts about the marketplace. The upshot is we’ve  allowed the neo-liberal right to hijack this word to favour the activities of the big corporations; they’re the opposite of the market because they undermine it. They

In summary the marketplace has little to do with profit and everything to do with community. When people can meet and freely interact they will naturally make deals and develop new ideas. The omni-corporate extraction of decision-making from the local and its relocation to the global means the interactions that generate genuine innovation are less likely to happen.  Views tend to polarise and competing ideologies are a poor basis for building trusting relationships.

Large scale activities are always better done by the statutory sector who have (or had) the infrastructure to employ people on reasonable wages. The argument that the private sector is more economic depends on lower wages. This reduces money circulating in neighbourhoods. The current recession was caused by this neo-liberal approach.

The other part is the role of banks. We need to understand how the banks create money. Every time they make a loan, they create money. Once upon a time you needed money to make a loan. It seems obvious. If I loan you £100 in bank notes, I must have £100 in bank notes to start with. However, if I credit £100 to your bank account a I don’t have to actually have that £100. So, you can calculate the percentage of money loaned covered by reserves.

If I am trading, I am helping  money circulate in the local economy. The corporate economy creates money through loans to corporations that tend to concentrate money in fewer hands and takes it out of local economies. First, banks make loans to bigger corporations because they trust them. Second, repayments return to the bank, translating newly created money into real money.

This fractional reserve banking practically extracts money from the local economy and concentrates it in the hands of banks and large businesses. To legislate to prevent banks loaning more than they have (or at least to restrict it) would be a good first step. But banking also needs to be deployed to support small businesses and not the corporations.

0 So, What is the Local Economy?

What is the local economy?  It is easier to say what the local economy is not!

The local economy is where traders, small businesses and self-employed have a personal stake in the economy. They have their own businesses and solidarity with others who are active in the same neighbourhood.  By neighbourhood I mean a part of a city or possibly a city or region.  It varies depending upon the nature of the business.  Trading outside the neighbourhood is crucial for many businesses, the key to the local economy is solidarity and this takes many forms, not all financial.

Local Scenarios

The degree to which businesses practice solidarity is important. So, let’s imagine a few scenarios:

• An estate or small town built to accommodate a major business. In the past these were coal mines, steel works or other large companies, the relationship between ICI and Billingham springs to mind. The economy depends upon the survival of one key industry. Everything else in the neighbourhood will be to some degree dependent upon it. There will be shops whilst people have money to shop in them. This model fails when the main industry disappears, there is not enough money circulating to keep other businesses going and the entire economy collapses.
• So, the second model is the estate or small town there the economy has collapsed. It seems difficult to re-start a collapsed economy.
• A more stable model is where there are several large businesses so the economy is not dependent on the survival of one. This perhaps describes most of our major cities. They may be dependent on one type of industry but not on one company. Sheffield for example is still known as the Steel City. It still has several significant steel mills even though the numbers have fallen and so have the numbers employed by the remaining businesses.
• The city allows pockets of local economies to grow within it. So, Hunters Bar and Spital Hill are possible because they are a part of a larger economic entity, where a neighbourhood has a critical mass of small traders and self-employed working behind the scenes. Traders need footfall and so it’s difficult to open a shop where there are no others unless there is some reason people will pass your door. So, the most successful small trader areas will be either city centres or places where people visit, to view some attraction. Such attractions draw visitors and so attract other self-employed or small businesses. Where there is sufficient footfall, a number of businesses and other attractions accumulate, and we have a local marketplace.

Conclusion

To summarise, every neighbourhood has a local economy. The degree to which it is a satellite economy to some large-scale enterprise, a strong or robust coalition of small businesses or an economic wasteland depends on local circumstances.

The problem for many neighbourhoods is the local economy is invisible. Community development usually focuses upon the needs of disadvantaged people; so the focus is on children and young people, or the elderly or unemployed. Business people have other priorities and so are less inclined to engage in community activities. And yet arguably they are the people who build community through the local marketplace.

0 Two Examples of Local Economies

Last time I wrote about what I don’t mean by the local economy and next time I’ll suggest a definition.  In any city you will find several local economies (and arguably the city is itself a local economy). It is important to understand for any place the local economy exists; it can’t not exist. It might be strong or weak but it’s there.

I live in Sheffield in the UK and I can think of several local economies within the city.  Today I shall describe two of them.

Hunters Bar

Shops on Sharrow Vale Road, Hunters Bar

This area is strategically placed between the inner city and affluent leafy suburbs. It is on good bus routes and has plenty of on-street parking. It’s the sort of place where you might go on an afternoon off work.

There are a couple of good parks and lots of small shops. There are very few of the big chains, just one supermarket and almost all the other shops are small traders. So, you can visit the parks and then get a coffee and do some speciality shopping. The shops are mostly speciality food, arts and crafts, fashion, etc.

Some of the shops are outlets for local artists and craftspeople and so they support a home-based economy too. The area is popular with students and ex-students and so there are a many self-employed people living there. Some play a direct role in the local economy, by using the shops as outlets. Others play an indirect role by shopping and so keeping money earned outside the area circulating locally.

This seems to have sprung up spontaneously over many years and contrasts with less attractive shopping centres in the more affluent areas.  Whilst these may include small traders, they are mostly smaller and so tend to serve a local neighbourhood and not attract visitors from outside.

Why is Hunters Bar as success?  It’s hard to be certain but I suspect it is largely lower costs and the proximity to more affluent areas.  Being on a major route means many people will pass through the area between home and the city centre.

Spital Hill

Shops on Spital Hill

This area is notorious for being in precipitate decline for probably 40 years! The infrastructure is poor and the area appears run-down and seedy. This is not the fault of the traders in the area who have in recent years experienced something of a renaissance.

In November 2 years ago the biggest Tesco supermarket in Europe opened on its doorstep. The predictions were that the 6 or so local small grocery shops would close. Despite Tesco’s best efforts they’re all hanged on. There are loads of small cafes and gift shops.  Are they doing well?  Probably not brilliantly but they’re hanging on and most of the traders have been around for several years.

This appears to be a substantially Islāmic economy. I understand many people work there for minimal or no wages. Keeping the family business going is more important at this stage than personal income. I don’t know the details of how they’re doing this but I’m sure it is through support from community and family networks.

The government has paid for some infrastructure improvement in the area. They have made some welcome cosmetic changes but I am not aware of much in the way of direct support for the businesses.  Tesco has brought more footfall to the area, as people who travel by bus have to walk onto Spital Hill but this cannot account for its survival.

To keep competing with big Tesco is an achievement. Is it sustainable? I can’t say for certain but I suspect it will continue because the families have invested so much in it.

2 What is Not the Local Economy?

The two case studies, the Grocer’s Shop and the Charitable Business, illustrate some of the issues we face working in the local economy. So, what do I mean by the local economy?  There is no agreed definition. There is no right or wrong answer. Here are a few things I believe are not the local economy, even though they are legitimate uses of the term.

International Development Projects

For example, international developmental projects for the local economy in disadvantaged countries. The aim of international aid is to develop local economies.

It is something I know very little about. I’m interested in UK neighbourhoods, advantaged or  disadvantaged. Clearly disadvantaged neighbourhoods present a greater challenge but we cannot ignore more advantaged neighbourhoods.  They may be where we can find helpful examples of local economic development.

Maybe my experience and  ideas that have a wider application than UK neighbourhoods but I must write about what I know.  However, it is possible lessons from international development projects apply in the UK too.  For example, participatory appraisal and micro-credit are both approaches developed in disadvantaged countries to build local economies.  Groups in the UK use the with some success in the UK, whilst despite a few attempts micro-credit is a tougher proposition, primarily because of the economic environment in the UK.

Government Schemes

Some people associate the local economy with large-scale government-funded regeneration projects. My experience is developmentally these, for example New Deal for Communities, do not necessarily impact upon the local economy. The money passes through the local economy but leaves no lasting change.  Jobs created too often become dependent upon the grants.  After grants run out, these projects rarely obtain mainstream or any other ongoing funding.

An imposed or top-down scheme without local support and centrally planned, works on a one size fits all principle. It’s possible, where there is a thriving local economy, there might be scope for an effective government scheme. But where there is no thriving local economy I doubt large-scale schemes can be effective. It would be interesting to find research into the nature of neighbourhoods where schemes have been successful but I suspect if there are any they will be neighbourhoods where there is already a thriving local economy.

Social Enterprise

Social enterprises may be an integral element in a local economy but they are neither necessary nor sufficient for the success of a local economy. They cannot be the local economy in and of themselves. They are not essential to a thriving local economy.

Social enterprises and other creative local projects may be a sign of a thriving local economy. They’re not necessary because many neighbourhoods have a thriving local economy and no such projects and next time I shall describe a couple of examples that do not include social enterprise.  Whether any have successfully revived a local economy is an interesting question.  I shall share any I find out about.

Social enterprise can be an exciting part of a local economy and can catalyse economic growth. Social enterprise and other innovative economic projects can be a sign of a thriving economy but they cannot thrive without grants in a local economy that is not itself thriving.

Before I go on to define what I mean by a local economy, I shall next time offer a couple of examples.

0 Third Sector Economic Projects: A Charitable Business

This is a second case study illustrating how third sector organisations function in the local economy. I’ve based these case studies on real projects and as far as I know all of them still exist and have moved on since I knew them. Any case study is necessarily a snapshot in time. So, if anyone thinks they can identify the projects please remember first, my intention is to describe the issues and not to criticise the project. Second, these issues do not necessarily apply to this organisations today; they probably struggle with entirely different issues!

Social Enterprise or Charitable Business?

I believe the business I’m going to write about today is doing well. My concerns about it relate to an early stage in its development and its genesis raises some important questions.

It started as an attractive idea using the teaching of particular skills to support a group of disadvantaged people. Their business plan for a social enterprise won awards and some grants and loans to get started.

Whilst funding bodies recognised them as a social enterprise, they looked like a small business. They were in effect one person investing a lot of money in a risky enterprise. Whilst their values were positive, they lacked business acumen and their success depended upon the support of statutory sector funding bodies.

They were successful because they marketed themselves as a social enterprise.  Whether or not you are a social enterprise should not depend solely on your beneficiaries.  The beneficiaries for this project had particular disadvantages and so that made the offer perhaps charitable.  It did not make it a social enterprise.  It is a social enterprise where a group of beneficiaries form the business or maybe a neighbourhood organisation identifies this group of beneficiaries.

A Business Without a Market

What we have here is a sole trader business whose market notionally includes its beneficiaries.  In terms of where its funding comes from, its market was its funding bodies.

This business had no market.  Whether the market was their beneficiaries or others who might purchase services from the enterprise, they simply did not have a list of contacts.  They had run no trials to prove they had a market and had not a shred of evidence that it existed.   They were in effect dependent upon grants and loans. It was touch and go, but they did eventually land a large grant and so may be able to establish their business.

This story raises a number of issues:

2 Third Sector Economic Projects: A Grocers’ Shop

This, the first of two case studies, illustrates some of the issues third sector economic projects encounter when organising projects in the local economy. Both case studies are snapshots of real projects.  Any case study is necessarily a snapshot in time. So, if anyone thinks they can identify these projects please remember my purpose is to describe the issues these projects faced at a certain time in their development. I do not intend to evaluate their response to the issues they faced.  These issues do not necessarily apply to these organisations today; they probably struggle with entirely different problems!

Fairly Traded Grocers’ Shop

Today’s example is a shop selling fairly traded goods, mostly groceries. It is still going and as far as I know it is doing well. In its early days it struggled with the contradictions of straddling two sectors. Its values are pro-fair trade, organic food, against animal cruelty, etc. They use window displays for example to get their message across.

Volunteers ran the shop. Its profits were for charitable purposes. This sets up some interesting contradictions. First, it means the shop is competing with other shops who pay their staff. This must mean it has an unfair advantage in the marketplace.  No-ones livelihood depended on this shop.  So, the balance is between its charitable aims and the likely impact it might have on its competitors who may be dependent upon the success of their businesses.

There is a more subtle issue. At one time, the shop was under-performing, unable to generate the income you might expect given its location. The reason seemed to be, not having the overheads of similar businesses, there was no incentive to exploit its advantage.

At the same time, it set up a second shop in a disadvantaged area. It was unable to support it financially and so the second project closed. The second shop did not attract volunteers from the first and had to find its own in a community that questioned the idea of working for nothing. But the first shop was not at the time generating sufficient income to support the second.   The second shop arguably supported the charitable aims of the shops’ parent charity.

Leadership

This highlights some of the issues when taking a third sector approach to private sector activity. This project brought its own bureaucracy not so much from the statutory sector, it was never grant aided, but from the church.

Its leadership was ideological, not practical and used bureaucracy for control. This is a common problem in any organisation but is less of an issue where there are clear lines of ownership and/or leadership. If you don’t have to do well financially, it opens up the path to management by whim.

Because it could survive without staffing overheads, it had no incentive to exploit its advantage in the marketplace.  Consequently it found it was unable to grow naturally and so contribute to the second shop.

The charity could have used the first shop to fund the second but it was unable to manage effectively a shop with significant advantages in the marketplace, namely reduced overheads, so it could support the charity’s other activities.  This undermined the fairness of its activities competing in the local economy.

The problem was in part lack of experience and an over-complicated management structure.  Most small shops are managed by their owners and rarely by a committee of people with little day-to-day involvement in the enterprise.  The focus of the organisation was on its charitable activities and not on the local economy.

However, nothing is ever achieved without trying new things.  The shop is still going and seems to be doing well.  Maybe they are finding a place in the local economy and a role that makes sense.  Their low overheads provides them with the time they need to experiment and make mistakes.  This is a luxury not always available to small businesses.