Local policies for building community wealth

Originally published by NewStart

At the Democracy Collaborative, we’re interested in finding ways to build community wealth at scale — that is, in finding ways to anchor capital, democratise ownership, and stabilise local economies to really make a difference in the lives of low-income communities that find themselves marginalised by the current paradigm of economic development.

Making this happen means thinking past ‘projects’. While it’s absolutely essential that projects like individual worker co-operatives exist, the promise they offer of a viable alternative can only be kept by creating the conditions that can help community-sustaining economic institutions multiply and thrive.

It’s with this in the mind that we wrote our latest report,Policies for Community Wealth Building: Leveraging State and Local Resources. Drawing on our work with municipal governments and local stakeholders on the ground in places like Cleveland, Ohio, and Jacksonville, Florida, as well as our larger work outlining more comprehensive state and federal level policy solutions, the report underscores the need for creative solutions to economic problems.

While our work is largely centered on the particular situations faced in the US, the basic principles behind our recommendations should be broadly applicable: we focus on measures that aim to leverage local resources — especially those that can keep capital anchored locally — and which aim to benefit those — like poor communities of colour — who have been historically excluded from or marginalised and exploited in the traditional economic process. Above all, however, we focus on what works, grounding both our immediately pragmatic and more aspirational recommendations in community wealth building tools which have been field-tested and proven effective.

Use available resources

We realise that, at the local level, budget constraints are real and impossible to ignore. What’s therefore exceptionally exciting about reorienting local policy towards community wealth building is that it makes maximal use of existing resources.

For example, in the US, non-profit ‘anchor institutions’ like universities and hospitals spend over $1tn a year, but very little of that sizeable amount is spent in their local communities. A savvy policymaker can spend a relatively small amount of money to create the necessary local capacity and connections to channel these anchor purchases to businesses rooted in their communities, resulting in potentially game-changing amounts of money remaining in local circulation. It’s a way to create local jobs without requiring large amounts of new public money, something local governments are hard pressed to find in the age of austerity.

Support worker co-operatives

Worker ownership is another good example; while many people are rightly inspired by worker co-operatives as a potential basis for a more democratic economy (including the New York city council, which recently launched a $1.2m fund to support the development of new co-ops), it’s important to recognize that more mundane forms of employee ownership, like Employee Stock Ownership Plans, already have a significant economic effect at a scale that provides demonstrable benefits to society as a whole.

Just in the US, 10.3 million workers own a piece of their business through mechanisms like these — with economic assets under employee ownership worth $942bn. These employee-owned firms are vastly less likely to abandon the communities in which their workers reside, providing key economic stability in an age where speculative global financial capital can all too easily tear the economic foundations out from under a city or state.

And with millions of US business owners poised to retire in the coming years, it won’t take much to encourage the conversion of many more businesses to employee ownership: robust models already exist for local government-funded centres that provide the necessary technical assistance and education. Such centres can simultaneously help democratise the economy while also retaining jobs at a cost far lower than that involved with many profligate corporate subsidies. Furthermore, establishing such employee ownership centers can lay the groundwork and build capacity for helping create even more transformative initiatives like worker co-operatives.

Put responsible banking ordinances in place

A similar pattern, where relatively simple measures point the way towards larger interventions, can be seen in local government finance. The collapse of the housing market in 2007-2008 showed the extent to which an unconstrained banking sector could wreak havoc on local communities — for instance, African American communities saw about a third of their wealth evaporate in the economic crisis.

Far from the national regulatory arena, an increasing number of US cities are taking matters into their own hands with so-called ‘responsible banking ordinances’. The idea is simple, elegant, and effective. Cities spend and collect large amounts of money, and that money needs to be deposited somewhere. A responsible banking ordinance basically makes any bank that wants to hold these lucrative city deposits behave themselves; depending on local circumstances, these provisions can prevent predatory lending, increase the availability of banking services in lower-income communities, or drive investment in community projects.

Such relatively simple measures at the city level (again, requiring very little new public money to be spent) can set important precedents for further innovations in the financial ecosystem aimed at bolstering a community-sustaining economy, like public banking. Here, the long history of the Bank of North Dakota has shown how state government deposits can capitalise a financial institution responsive to the needs of smaller community-based banks and locally-based industry — and which can even help provide much-needed refinancing options in an era of exploding student debt, all while turning a profit that’s returned to the state as revenue.

Put community wealth building at the heart of local economic development

Beyond these individual policy examples, it’s also extremely encouraging to see policymakers’ increasing awareness of community wealth building as a more general guiding principle for local economic development. Community wealth building provides a framework that can tie together innovative strategies around local investment, public and nonprofit procurement, job creation, land management, affordable housing, and more — a framework which can help illuminate the opportunities for these strategies to be woven together into a more comprehensive and mutually-reinforcing whole.

In Richmond, Virginia, for example, Mayor Dwight Jones has created the first city-level Office of Community Wealth Building, explicitly endorsing this kind of holistic approach as part of a major anti-poverty initiative. Decades of disinvestment and a broken model of economic development prioritising speculative profits over the real needs of communities have created a real long-term crisis in many cities, and our hope is that more and more policymakers realize that community wealth building offers a compelling, effective and essential alternative vision.