“The purpose of our local economy is to maximise the happiness and wellbeing of our entire community, to create an abundance of opportunity to satisfy our needs, and use and distribute resources fairly, in a way that respects natural limits.” (Totnes Local Economic Blueprint)

#ruralisolation            #enablingstate

When discussing the challenges facing several rural communities in Europe, especially the most remote ones, we often allude to lack of investment – both public and private – as one of the greatest barriers to their development. In several places, it is safe to assume that investment on any significant scale will probably never materialise. Outside businesses and investors simply do not see any economic incentive to invest.

But is large-scale investment really what is missing for these communities? A recent report on ultra-micro economics published by Co-operatives UK suggests that it is not. According to David Boyle, the report’s author, communities often possess ignored assets that can be turned into wealth and wellbeing:

[…] even the biggest losers in the developed world […] do actually possess the basics they need for an economy: they have money flowing in to the remaining public sector outposts, universities or hospitals, and they have people with imagination and drive who want to work. They have people who need to buy things, and they have raw materials, maybe in the form of rubbish, but resources nonetheless.

Ultra-micro economics teach us that really local economics is about repatriating economic activity and keeping resources flowing within the community. Small businesses and social enterprises are key agents at this scale of economic activity. Research by the New Economics Foundation has found that spending £10 in a local food outlet in the UK is worth another £25 to the local economy, as it gets re-spent locally several times. On the other hand, spending money in a large supermarket chain only returns about half of that to the local economy.

Sustainable economic success requires a variety of local enterprises and co-operatives that can trade with and invest in each other. This is not only about economic transactions. At this scale, economics becomes more centred on – and reliant upon – strong social networks and relationships based on trust and mutual support. These, added to local citizens’ knowledge and willingness to improve things, are invaluable assets for development. Evidence shows that places with stronger social capital tend to be more successful economically.

This is not to say that outside investment is not important – in fact, not all needs can be met through the local economy. But it can be harmful when this outside investment drains resources away from communities, rather than supporting local businesses. A large industrial plant, for example, may divert profits elsewhere and exacerbate local inequalities of income and wealth. The opposite of this would be enterprises, services and finances that create a local economy based on local needs and resources, and that empower people to be economically active and included.

Ultra-micro economics has the potential to promote environmental sustainability and improved social care through local innovation. Small enterprises can provide retrofitting in homes, co-operatives can invest in renewable energy sources, and social entrepreneurs can offer highly personalised care and drive innovation in social services. This type of economic approach also encourages volunteering, active citizenship and what the New Economics Foundation has called the “core economy of unpaid work, everyday wisdom and social connections on which all our lives depend”.

Examples of ultra-micro approaches exist in energy, food, finance, procurement, social care and other areas. However, as Boyle argues, what is needed is a comprehensive approach to local economics. This approach would build synergies between micro trade, micro investment, micro finance and micro service provision, bringing a range of actors – public and private – together to design and implement a local strategy to economic management.

This strategy would benefit enormously from local knowledge, skills and motivation:

  • Local shops can come together in co-operatives to offer more products to their customers.
  • Pension funds can be mobilised for local regeneration.
  • Green investment can provide employment and up-skilling.
  • Local financial institutions can keep resources within the community by offering accessible credit to small entrepreneurs.
  • Abandoned buildings and plots of land can be transformed into service centres or community gardens by local enterprises.

Although ultra-micro economics can only work if different parts of the community pull their resources together, we cannot forget another important factor for its success: the role of government.

Central government has to support the launch of local institutions that work at the required scale. For example, we need financial institutions that are small enough to lend money to small projects and entrepreneurs – credit unions in the USA, the KfW in Germany and co-operative banks in Italy are helpful examples to follow. Legislation and tax regulation have an important incentivising role to play here. Similarly, legislation on small and social enterprises, as well as the voluntary sector and co-operatives, needs to be robust and supportive.

Local government has to develop a vision for local economic development and accept its responsibilities to help deliver it. Councils, municipalities and towns can focus their procurement activity on local enterprises and organisations that generate real value to local communities and keep the benefits of public spending locally. In the UK, the Social Value Act 2012 provides an important legal platform to achieve this.

European funding for rural development has to continue to improve its track record in supporting local strategies for development. Community-Led Local Development (CLLD) needs to be better targeted at the micro level and involve local actors more effectively. Funding can be channelled to support small businesses and the voluntary sector, by providing technical assistance and training for the local labour force. Far too often have we heard criticisms towards LEADER and the lack of local empowerment. Such criticisms must not be ignored but addressed.

Elsewhere, Volonteurope is advocating for the role of the enabling state in promoting cross-sector collaboration, empowering citizens and communities to become active agents of the changes they wish to see in their lives, investing in preventing harm to society, developing a long-term vision of sustainability, fairness and wellbeing, and promoting asset-based approaches to local development.

It is now more relevant than ever that states throughout Europe assume this enabling role. Ultra-micro economics – and similarly, ultra-micro governance – is not about creating new resources, but making better use of wasted resources, especially people’s solidarity, kindliness and activism.

There are millions of individuals in Europe ready to take action. All they need is the opportunity and support to do so. Only when we learn to harness these resources for our prosperity, can we appreciate that small is indeed beautiful.