Conrad Parke from CLES blogs about community wealth building in Birmingham.
The Economic Justice Action Network pulls focus on community wealth-building and how we might amplify this approach in our efforts to tackle the root causes of economic injustice.
In our Action Network meeting on 4 October we adopted the lens of community wealth-building as a route to engage with the topic of economic justice. We began the session in small groups, orienting ourselves around how we might collectively define economic justice. These included:
- Equality of opportunity and access to services and resources
- Allowing people to function in a society regardless of their circumstances
- The importance of treating people as of equal worth – everyone has value and insights
- ‘Allocative efficiency’ – using resources fairly and wisely
- Economic justice must link to other areas of justice
- No matter who you are you should have dignity and a fair life
(These contributions and definitions will be collated and shared publicly as part of our suite of Action Network resources).
We then moved onto the topic of community wealth-building, where I introduced this progressive approach and its potential to re-model the economy in the city of Birmingham. During the meeting, many questions surfaced about community wealth-building (CWB). I have tried to provide some answers to those questions in this blog.
What is community wealth-building?
Community wealth-building is a progressive approach to economic development which sets out to retain more wealth and opportunity for the benefit of local people. It is a system-changing approach that works to produce a greater sharing of economic prosperity by ensuring that a greater proportion of wealth is retained and re-circulated in the local economies so that everybody benefits (also known as the ‘Local Multiplier Effect’, see below).
This approach is an alternative to simply letting money drain away into the pockets of distant shareholders and the vaults of off shore banks. It is also an approach that recognises that there is more to the economy than the private sector. Community wealth-building sees the public sector, voluntary sector, social care sector and all other ‘sectors’ as having equal importance to the private sector, in terms of both keeping the economy moving and creating economic opportunities we can all benefit from.
Why community wealth-building?
I would argue we need CWB because we live in a city with some of the most disadvantaged neighbourhoods in the country, some of the highest levels of unemployment nationally, plus a multitude of other significant indicators of economic inequality. This is despite Birmingham experiencing almost uninterrupted economic growth for the past 20 years. In fact, if you could take Birmingham’s GDP (gross domestic product – read the previous blog for reference) and divide it amongst every working person in the city it would result in an average income over £58k per person whereas the real average income is more like £28k per person*! This suggests that about half the wealth created in Birmingham is then leaving it. Where does it go? Mainly to shareholders, profits for big businesses, people who work in Birmingham but live and spend their money elsewhere, and the inflated salaries of the already super rich. Or, to put it another way, the problem underpinning Birmingham’s economic injustice is not a problem of needing to create yet more wealth, but a problem of where that wealth flows. That is why we need Community Wealth Building. * *Economic Output in Birmingham 2020, Birmingham City Council.
What is the ‘Local Multiplier Effect’?
The local multiplier effect is the additional economic benefit generated for an area by increasing the amount of money spent, and is then recirculated, in that local economy. For example, it occurs when money is spent through local businesses and then those businesses, in turn, use that money to either buy locally themselves or pay wages to local people. In other words, a chain reaction in local economic activity.
How does community wealth-building work in practice?
CWB works in practice by thinking a bit harder about the economic assets we have at our disposal and then working (‘sweating’) those assets harder to create greater local benefit. For example, the largest employment sector in the city is health with over 91,000 jobs* and yet we rarely look at the NHS as an economic asset. In addition, University Hospitals Trust Birmingham alone spends £1.5b a year on goods and services.
A community wealth-building approach asks the questions:
- How can we help these organisations become economic assets for the city?
- How do we direct more jobs within these organisations to communities where they will make the biggest difference?
- How do we direct more of these organisations’ spend to local businesses, thereby adding the greatest social value?
*Workplace Employment in Birmingham 2021, Birmingham City Council
What are the other benefits?
As well as all the recognised wider social benefits of addressing poverty (improved health, reduced crime etc.) the CWB approach also aims to develop much stronger local economic ecosystems which, in turn, can help build stronger communities, and create greater social cohesion and stability. In addition, by actively working to source jobs and spend locally it reduces the carbon miles spent on travelling to work and increases the likelihood of participation in ‘active travel’ – both of which are good for the environment.
How do we measure community wealth-building?
The big picture for CWB is to measure how much money is being retained in the local economy. I currently estimate that about half the wealth created in Birmingham leaves the city, amounting to approximately £15b a year. An increase in the wealth retained by the city of just 10% would mean an extra £1.5b for the Birmingham economy, which translates (very roughly!) to about 50,000 more jobs. A different way to measure is to look at the spend and recruitment patterns of large institutions (health trusts, local authority, universities, colleges, housing associations) to see what proportion is ‘staying local’ and whether this proportion is increasing.
How do we monitor the social value of community wealth-building?
I would advocate for a simple approach. So for jobs I would monitor whether recruitment rates are increasing in communities where people are traditionally seen as being trapped in low income and insecure employment. Then, we need a rebalancing in the workforce with more people in work from traditionally under-represented groups in terms of age, gender, disability, ethnicity etc. As for spend, I would track whether an increase in local spend is also being reflected in an increase in spend-through to businesses that represent greater social value by their very nature – i.e. small or micro businesses, social enterprises, co-operatives, etc.
Which cities are doing community wealth-building well?
CWB has been adopted as national policy by the devolved governments in Scotland, Wales and N. Ireland. In England it is being adopted at local authority level with two of the leading authorities being seen as Preston and Greater Manchester Council. In Europe I would recommend taking a look at Rotterdam in the Netherlands. But the real home of CWB is actually Cleveland, Ohio in the USA. Here is a link to Cleveland’s Evergreen initiative, where the aim is to create meaningful jobs, employee ownership and profit-sharing opportunities in the locality.
How do new arrivals into areas impact community wealth-building?
I cannot claim to be an expert on this issue but from my own experience I think new arrivals frequently add a real dynamism to a local economy by creating businesses that serve the specific needs of that community (food, fashion, legal services, etc.). They can also bring much needed skills. I was involved in a project that in just three years found 350 new arrivals in Birmingham with overseas health qualifications such as nurses, midwives, paediatricians and even an eye surgeon.
Where in Birmingham feels ready for action and change on community wealth-building capacity?
I have written about the need to look at the big institutions in the city (hospitals, universities, colleges etc) as economic assets. These are sometimes referred to as ‘anchor institutions’ because they are not going anywhere. However, to unlock these assets for a local community it is essential to also have ‘community anchor institutions’ that can act as the link between local people and opportunities that exist within big institutions. By ‘community anchor institution’ I mean the type of local organisation that has the reach and trust in local communities that big institutions do not have. Therefore, areas in Birmingham that are ready for CWB are those areas that are rich in local community anchor institutions.
You can read more about community wealth-building here and you can contact Conrad if you’d like to discuss community wealth-building further via email. If any of this content piques your interest then you can join us at the next Action Network meeting, taking place on Wednesday 29 November, 11.30-2.30pm in Birmingham. Refreshments and lunch will be provided. Please sign up via this link if you would like to attend.