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Trickle-up economics – Prospect

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Preston bus station. Photo: Wikimedia Commons

Just occasionally, something exceptional emerges from a town or city in crisis. New ideas are deployed to meet the challenges. Communities like Cleveland in the US and Preston in England were left in freefall by the collapse of traditional industry and the failure of trickle-down economics. Thanks to local efforts, what emerged from the chaos was a new model—one I call “community wealth building.” 

The idea is to grow the economy from the bottom up. You make better use of local assets—like the purchasing power of non-profit and public institutions—to create opportunities for local businesses. You reverse extractive patterns of outsourcing and disinvestment. The end result is the revival of once struggling towns and cities. Importantly, the evidence shows that this is more than theory—a recent PwC study named Preston, one of the most distressed communities just a few short years ago, as the most improved city in the UK.

Community wealth building is not merely a way to smooth over the rough edges of an ultimately sound economic system. It is the kernel of a comprehensive new approach, which is why Marjorie Kelly and I called our forthcoming book The Making of a Democratic Economy. The redirection of spending by local public institutions has grabbed most attention, but it is part of a broader toolbox which is still being furnished. Ultimately, community wealth building is a set of principles—democratised ownership, local investment, and so on—that allow us to intervene in practical ways to create a new economic model, with “the local” at its core. 

There is no shortage of examples of this method being put to use. Consider, for instance, the Evergreen cooperatives in Cleveland. This network of businesses, owned by local workers, was one of the first comprehensive models built around the procurement streams of local hospitals and universities. With a wealth of experience, Evergreen is well placed to support individual cooperatives. Now the network is advancing further, taking on responsibility for the laundry service at the Cleveland Clinic care centre. Work that was previously done by a multinational, outsourcing firm will be taken on by locally-owned businesses. In return, the clinic will invest in key upgrades at Evergreen’s new facility, advancing local prosperity and shoring up a more reliable supply chain. Perhaps most importantly, Evergreen is launching an ambitious new fund, which will help convert other local businesses to employee ownership, retaining jobs and wealth in the economy. 

In the UK, Preston, for its part, has focused on public ownership as a key strategy—for instance with its award-winning new public market, built to provide an area for small enterprises and revitalise civic space. Especially noteworthy is the use of public resources for the common good: local pension funds to drive investment in urban development, and a planned public financial institution to help accelerate progress across the city. Similar creativity can be found in many other UK towns, which have begun to share best practice in partnership with organisations like the Centre for Local Economic Strategies, the Local Trust, and Power to Change.

Local efforts work best when they are not operating in total isolation. In the US, we have a healthcare network that brings together over 40 health bodies, collectively employing more than one million people. We are building a national web to ensure healthcare is at the heart of new community projects. Of particular interest is the way many of the bodies—each composed of numerous hospitals, some spanning multiple states—are beginning to use system-level resources, like their reserve funds, to drive investment in policies that will improve health: for example, the building of affordable housing. In the UK, similar momentum is building within the NHS, which recently affirmed a commitment to the principles of community wealth building. And as well as being supported by wider intervention, local reforms in places like Cleveland and Oldham can foster that wider change—by pointing the way towards a broader vision.

“A recent study named Preston as the most improved city in the UK”

Large scale policy is needed—and it is being developed. Wales’ Foundational Economy programme includes a fund to help local economies find a new approach. The Scottish government is supporting the development of community schemes in Glasgow and other cities. On both sides of the Atlantic, there are proposals to ramp up the share of the economy in local, democratic ownership through “inclusive ownership funds.” 

Calls for public ownership in key industries—such as presidential hopeful Elizabeth Warren’s call for the public manufacture of vital pharmaceuticals—are also accelerating in both the US and UK. An increasingly sophisticated discussion of “democratic public ownership” is taking place in a Labour consultation process under Shadow Chancellor John McDonnell. It points the way towards a new role for the state, which departs from the top-down, postwar nationalised corporation, and connects back to the local democratic renewal we see afoot in cities like Preston, Bristol, and Birmingham. 

For community wealth building to live up to its promise, we must see it not just as a promising local practice that can make immediate improvements in the economic fortunes of our towns and cities, but as part of a wider transformation. The doctrines that emanated from Thatcher and Reagan in the 1980s swept much of the world. Forty years later, the UK and US can again lead—this time driving the creation of a truly local, truly democratic economy.

This article features in “All about towns,” Prospect’s new report in partnership with the Joseph Rowntree Foundation