Centre for Environment and Society

Taking Back the Middle for Local Economies

Jules Pretty, University of Essex

The Global and the Local

Increasing globalisation offers the route to success for many. The proportion of the world’s economy that is traded has grown from 7% in 1950 to 23% today. The World Trade Organisation predicts that this will grow to 50% by 2020, as the world trade system becomes more `liberalised’ and less regulated. Many, though, have concerns. Rapid flows of money as investments clearly helped to boost the `tiger economies’ of South East Asia in the early 1990s. Yet in 1997 the bubble burst, and money started to flow outwards even more rapidly, leading to serious problems for the economies of many countries.

At the same time, the world’s environment continues to be threatened, despite widespread appreciation of problems and their causes. Global climate change, pollution of air, water and soils, soil erosion, soil salinisation, freshwater depletion, forest loss, energy overuse, and species extinctions are all symptoms of an economic process that depletes resources at one end, and causes pollution at the other. As a result, the life support services of the world are under threat.

Amidst these global forces, alternative patterns of development are now emerging. The focus is shifting towards sustainable development in local economies. And empirical evidence is telling us that there are substantial benefits to be had. It is possible to live better whilst using fewer resources; it is possible to create new jobs and strengthen businesses; it is possible to improve the state of the environment; it is possible to develop more coherent and supportive social systems.

Sustainability thinking is not just about looking after wildlife, forests and oceans - it is about creating new societies and economies, so that we can live better, and do so without damaging the environment. Why, we might ask, has this not happened already if there are so many benefits? Amory Lovins (1998), co-author of the 1997 book "Factor Four", says it is partly because of an "economic fundamentalism which assumes that anything worth doing must have been done already".

He also points to a major change that has occurred in our world in the late 20th century. Our thinking about what constitutes economic progress is shaped by changes over the past two centuries. The industrial revolutions of the 18-19th centuries were based on a simple principle: when labour is scarce and natural resources abundant, make progress through improving labour productivity, and don’t worry about the impact on the environment. And this is still one of our main measures of success. Businesses, farms, the public sector - all `downsize’, `de-layer’ or simply sack workers when under pressure.

The consequence is leach-like unemployment in the economies of industrialised countries. In the OECD, there are 35 million people unemployed, a doubling since 1975. Some 20 million of these are in the European Union, and comprise 11% of the working population. More than a fifth of those unemployed are less than 25 years old.

But something has changed in recent years. Labour is no longer scarce, and natural resources are no longer abundant. Indeed the opposite is the case. It makes sense to seek resource savings rather than labour savings. As Lovins (1998) put it: "if you `sack’ the unproductive kilowatt hours, litres and tonnes, you can keep the people, who will have more and better work to do".

So instead of sacking the people, we should rid of the inefficient processes and substitute environmentally-sensitive or resource-efficient ones.

Five Capital Assets in Local Economies

Five assets are fundamental for welfare and economic development:

1. Natural Capital - nature’s goods and services

food, wood and fibre; water regulation and supply; waste assimilation, decomposition and treatment; nutrient cycling and fixation; soil formation; biological control of pests; climate regulation; wildlife habitats; storm protection and flood control; pollination; recreation and leisure; carbon sequestration.

2. Social Capital - the cohesiveness of people and societies

relations of trust that lubricate co-operation; common rules, norms and sanctions for behaviour; reciprocity and exchanges; connectedness and social institutions.

3. Human Capital - the status of individuals

stock of health, nutrition, education, skills and knowledge of individuals; access to services that provide these (schools, health services, adult training); the ways individuals interact with productive technologies.

4. Physical Capital - local infrastructure

roads and bridges; energy supplies; communications; housing and other buildings; markets; transport (air, road and rail); land.

5. Financial Capital - stocks of money

savings; access to credit; pensions; remittances; welfare payments; grants and subsidies.

These five assets are transformed by policies, processes and institutions to give desirable outcomes, such as jobs, welfare, economic growth, clean environment, sustainable use of natural resources, reduced crime, better health and schools, and so on. These desirable outcomes then feed back to help build up the five capital assets.

The basic principle is, therefore, that sustainable communities and local economies accumulate stocks of these five assets - they increase the capital base over time. But unsustainable communities and local economies deplete or run down capital. They spend capital assets as if they were income, so liquidating assets and leaving nothing for future generations.

Much of our economic growth is still fuelled by depleting or damaging one or more of these capital assets, such as modern agriculture running down natural capital but creating profits; or factories polluting rivers and paying low wages, but still paying profits to shareholders. The key challenge is to find ways to deliver the desirable outcomes whilst accumulating the entire capital base. This is sustainable development.

Characteristics of the Local Economy

The local economy is like a bucket the community would like to keep full. But this bucket invariably has holes in it. Every time someone buys something sourced from outside the local economy, then money leaks out. Each time raw materials are exported, then value is added somewhere else. Each time natural resources are depleted or polluted, the local capital base diminishes.

To balance this, money must flow in:

  • when people outside buy local products, such as food, timber, manufactured goods, tourist services, heritage and nature;
  • when local people work outside and bring back or remit salaries;

when local people receive pensions or benefits, or businesses receive grants.

But it does not have to be like this. Local economies can accumulate more natural, social and human capital at the same time as achieving the desirable outcomes by adopting five key principles.

1. Plug the leaks by using local renewable resources rather than externally-sourced:

  • Sustainable agriculture (that emphasises natural resource based technologies rather than fossil-fuel derived);
  • Local food systems and direct marketing;
  • Buy local campaigns for businesses;
  • Renewable energy generation (wind, water, tidal, biomass).

2. Recycle financial resources within the system by buying local goods and services:

  • Credit unions and other micro-finance;
  • LETS and local currencies;
  • Community banks and foundations.

3. Add value to local produce before it is exported:

  • Local food systems - farmers’ markets, box schemes, CSAs;
  • Green tourism;
  • Labelling, accreditation and traceability for food, fish and timber;
  • Local processing and manufacture.

4. Connect up local stakeholders (people and institutions) to create trust, new linkages and more efficient exchanges:

  • Buy local network for businesses;
  • Deliberative democracy and participatory governance methods for community planning and regeneration;
  • Strengthen local social institutions;
  • Farmers’ groups, community co-operatives.

5. Attract in external resources, especially money, skills and new technologies:

  • Buy local network for businesses;
  • Deliberative democracy and participatory governance methods for community planning and regeneration;
  • Strengthen local social institutions;
  • Farmers’ groups, community co-operatives.

The first four of these principles emphasises making more of local resources. The fifth is concerned with attracting in external resources. It is important to note that sustainable development for local economies is not a strategy to create autarkic communities that are only self-sufficient and totally unconnected to the rest of the world. Rather, it is first to make the best use of available resources, and then to engage and trade with other economies. This represents another change in thinking - from exogenous to endogenous development.

Patterns of Development

Endogenous development focuses on growing or originating from within. The priority is to look first at what resources are available in rural areas, and then to ask: can anything be done differently that results in better use of these already available resources? Can it be done without incurring environmental and social costs? But this is difficult, as the current patterns of institutions, policies, funding and intellectual thought all discriminate against endogenous development. When asked what they need, most people’s reflex is to turn to external solutions.

These attitudes tend to foster a `dependency deadlock'. Local people become entirely dependent on external agencies to provide solutions to local problems. Again, this may appear reasonable. If you pay your taxes, why should you not expect the local council to fix the road or supply other services? But there are always things that local people or businesses can do better - they know local conditions better. They will be still living there long after external bodies have departed. They just may not realise their own capabilities.

Exogenous development implies looking for outside solutions. Business recruitment, or `smokestack chasing' as it is called in North America, is an important strategy in local development, and it often makes a substantial difference. Yet there are problems, it can be expensive and risky.

Local communities or authorities usually must offer incentives to encourage businesses to relocate, such as land, infrastructure, tax breaks, and exemptions from labour and environmental regulations. At first this can look good, as extra jobs are created for local people when new factories or offices begin to operate.

But these incentives can backfire. All too often, the net effect is simply to move jobs around the country - from areas where businesses do not receive subsidies to those where they will. Take the case of a new factory announced in South Wales in 1996. The company was offered inducements by the Welsh Development Agency, as it would bring many new jobs. So it simply relocated its operations from Hull and Peterborough, closing factories there. The net result was little change in jobs, as they were simply transferred from one part of the country to another - except now they are soaking up public subsidies.

Incentives can be costly per job; and large companies tend to be footloose - they are easy come and easy go. In the USA, there are some 25,000 economic development committees bidding for 500 new plants each year (a 50:1 ratio). The State of Alabama offered Mercedes an incentive of $200,000 for each job to be created in a new factory.

Alan Whitehead and Judith Smyth call this exogenous approach `civic boosterism’. Authorities offer tax incentives to employers and investers, provide leisure facilities for mobile, high-earning professionals, and support prestige projects. Yet as they point out, while some communities can do well, all communities in a country cannot follow this approach. The first movers benefit and this simply inflates the price the most fashionable investors can demand for relocation. It also "assumes that citizens have no loyalty or commitment to their city... Social capital is what makes a city liveable, lived-in and lively".

Nonetheless, businesses looking to establish or relocate are looking for communities with vibrant local enterprise and high quality of life, and so the state of the local economy is vital. Local economic development (endogenous and emphasising local resources first) lacks fanfares and ribbon cutting, but can foster deeper community spirit and self-reliance, better quality environment and more sustainable jobs.


Sustainable Agriculture and the Local Economy

Sustainable agriculture helps the local economy in a number of different ways. It makes better use of available natural and social resources. This is done by minimising the use of external inputs, by utilising and regenerating internal resources more effectively, or by combinations of both. This ensures the efficient and effective use of what is available, and ensures that any dependencies on external systems are kept to a reasonable minimum.

The resource-conserving technologies used in sustainable agriculture are hugely beneficial for both farmers and rural environments. They make a positive contribution to natural capital, either returning it to pre-degraded levels or improving it yet more. At the same time, direct costs are reduced. There is `more from less’. More natural capital from fewer external inputs. More social capital from involving farmers and rural communities in change. More food output from fewer inputs.

Sustainable agriculture farmers do three things: they spend more money locally on knowledge-based goods and services; they employ slightly more people in the business of farming; and they add value where they can through processing and direct marketing.

  • More labour is needed on organic farms compared with conventional ones. Studies put the extra at between 20% and 100%, depending on whether crops and livestock are part of the enterprises, and whether on-farm marketing and processing are included. A recent study showed that an extra job per farm was created after conversion. One farm manager emphasised the impact of this farming on the local community: "The school and village pub would have disappeared by now if we had employed at conventional farming levels"
  • The Welsh Tir Cymen scheme has created local jobs and had a substantial multiplier effect in local economies. For the 718 farm agreements to the end of 1995-1996, it was estimated that 263 jobs had been created (equivalent to 0.37 jobs per farm). Tir Cymen emphasises whole farm agreements and a closer partnership between farmers and external authorities. Tir Cymen has benefited farming, wildlife, and local economies. Some 29 out of 35 local businesses reported an increase in demand for services and materials; and 16 new jobs were created. Importantly, farmers' expenditure on services and materials in local communities (a total of £448,000 for 131 farms) was 23% greater than the public support they received.
  • Recent research onto integrated farming systems, those that seek to incorporate sustainable agriculture technologies and practices into modern farming, has shown that farmers can make substantial cuts in pesticide and fertilizer use without damaging gross margins - 5-10 fold improvements in pesticide efficiency and 2-4 fold improvements in fertilizer efficiency are common across farming systems of Europe.

Local Food Systems and `Taking Back the Middle’

The food and drinks system is one of the largest industrial and commercial sectors in the world. Half a century ago, at least half of every pound spent on food found its way back to the farmer and rural community. The rest was spread amongst suppliers of various inputs (feeds, pesticides, fertilisers, seeds, machinery, labour and so on) and manufacturers, processors and retailers. Since then, the balance of power has shifted increasingly away from the middle, with value captured on the input side by agrochemical, feed and seed companies, and on the output side by those who move, transform and sell the food. Food consumers have benefited, as the real cost of food has fallen. There is now greater choice, and increasingly processed foods reduce preparation and cooking time.

But as far as farmers and rural communities are concerned, the effect has been largely negative. Farmers get a smaller share, typically 10-20%, and they also pass on less. They spend less in rural communities, and they employ fewer local people. There are four ways to take back the middle, so helping to spread the benefits more to rural communities:

(i) Sell direct to consumers, via farm shops and direct mailing; farmers’ and produce markets; community supported agriculture and box schemes:

  • In the UK, some 25,000 households are members of organic box schemes;
  • In the US, there are 2400 farmers' markets involving 20,000 farmers as vendors; each week one million people visit these markets, which turnover $1 billion per year; farmers' markets are now being established in several locations in the UK (the city of Bath set up the first).

(ii) Enhance links with urban communities through community co-operatives and community gardens and farms:

  • Community co-ops are especially effective in urban communities, such as Glasgow Healthy Castlemill project serving 3000 tenants in estates, and Birmingham Organic Roundabout, supplying 3000 households and employing 15 people;
  • Direct links between consumers and farmers have had spectacular success in Japan, with the rapid growth of the consumer co-operatives, sanchoku groups (direct from the place of production) and teikei schemes (tie-up or mutual compromise between consumers and producers). This extraordinary movement has been driven by consumers rather than farmers, and mainly by women. There are now some 800-1000 groups in Japan, with a total membership of 11 million people and an annual turnover of more than US $15 billion. These consumer-producer groups are based on relations of trust, and put a high value on face-to-face contact. Some of these have had a remarkable effect on farming, as well as on other environmental matters.

(iii) Increase collaboration between farmers’ groups, co-operatives and alliances, so as to create social capital by learning and working together:

  • Participatory research by farmers improves innovation and economic returns, as well as giving more farmers the confidence to make the transition to sustainable agriculture.

(iv) Enhance labelling and traceability of foodstuffs to increase bonds between consumer and producer:

  • Many farmers have joined recently launched assurance and traceability schemes;
  • Organic farming still has the clearest set of standards;
  • Local food labelling is on the increase, such as Taste of Anglia scheme, and Tastes of Tendring.

Food Shops

An inevitable consequence of the rise of out-of-town shopping and supermarkets has been the sharp decline in food shops. Some 6000 bakers, butchers, fishmongers and grocers were lost between 1990 and 1995 in the UK. There are now 25,000 out-of-town shopping developments in the UK. Each year, about 1000 independent garages also close down in rural areas.

Yet local shops provide more than just a place to buy food or other produce. They often are part of a dense local network of small retailers, producers and consumers, act as a social centre for communities, and help local people stay in touch with each other. A 1997 survey of 81 food shops in East Suffolk by Caroline Cranbrook found that they employed 548 people (317 part-time and flexible, so allowing the combination of work with childcare), and were buying from 295 local producers and processors. One shop alone was sourcing 40 local products.

As one example, a wholesale family butcher (two brothers) bought livestock from about 30 local farmers. These animals went to a local slaughterhouse, and the carcasses returned to the premises. This wholesale business produced fresh meat, cured and smoked bacon, sausages and cooked meats, and provided freezer packs. These products were supplied to 21 small shops. In addition, the family was running two butchers shops, which were also sourcing other foods such as eggs, vegetables, fruit juices, cakes and preserves, from 24 local producers. Box 1 contains three case studies

Box 2. Case studies of local food production and food web links in Suffolk

Brundish pig farmer

A young couple who had a small pig farm and other part-time jobs, decided to try to strengthen their business by making a value-added product. With assistance from the regional food group, Tastes of Anglia, and European Structural Fund grants, they were able to build up a business which now supports them full-time, together with two full-time and two part-time employees. The pig herd has been enlarged.

Initially, the new business sold high-quality hams, bacon and other products to a couple of nearby village shops. They have now increased the number of local outlets to 35 and also sell outside the region. In an interview, they said that it would have been impossible to start and sustain their business if there had been no village shops.

Campsea Ashe Village Stores

This small village store and post office was renovated by the owner in 1996. The work included carpentry, sign writing, rewiring, plumbing, shop front redesign, interior refurbishing and the instalment of new freezing cabinets.

A sandwich from Aldeburgh

An Alderburgh baker sells sandwiches. The lettuce in it comes from the neighbouring greengrocer who is supplied by a local wholesaler. This wholesaler buys much of his fruit and vegetables from local farmers. Meats used come from 3 different butchers, including the last pork butcher in Suffolk (Leiston). These butchers in turn buy their meat from at least five different local farmers and wholesalers (also sourcing local meat). And so it goes on!

Source: Cranbrook C. 1998. Food Webs. CPRE, London

Community Participation and Deliberation

Local economies benefit when stakeholders within the system are connected up so as to help create social capital. This may mean the creation of new community businesses and enterprises, or the emergence of new social institutions, such as farmers’ groups, community co-operatives, or community councils. But social capital creation needs a deliberative process to bring different people and institutions together, and this is usually best facilitated by an external person or agency.

New rural partnerships are needed. There are good social reasons for working together in partnerships. Regular exchanges and reciprocity increase trust and confidence, and lubricate co-operation. There are great assets already within communities. The existing assets are primarily in social capital: people know each other, and they tend to help one another when in need. They bring good expertise; they experience problems at first hand; they are aware of local networks; and they are much more likely to sustain initiatives if they feel ownership.

A number of participatory processes are already proven and widely used in the UK, including Village or Parish Appraisals, Participatory Appraisal, Future Search, Community Audits, Parish Maps, Action Planning, Planning for Real, and Citizens’ Juries. Local examples include:

  • 20 Village appraisals conducted in village of Essex by the Rural Community Council of Essex; some leading to substantial benefits, such as at Mountnessing, where a playing field, cricket team, village hall and youth club were started after the appraisal;
  • A Future Search event was used to launch the process for the development of the Colne Estuary management plan;
  • Community planning events used in the Stour Valley to assess the sustainability of the whole river valley system;
  • Participatory processes used for shoreline management plans and conflict resolution by the Norfolk Coast Project.