A new type of local economy

I’m working on a research project with Transition Network to assess the potential value of a new type of local economy in Manchester (I’ll write more about this soon).

Transition is an initiative that supports community-led responses to climate change, peak oil and natural resource depletion, building community resilience and enhancing quality of life.

Below is my submission to a call for evidence from IPPR North Northern Economic Futures Commission who are looking at critical issues facing the economy of the North and setting out a new approach to local and regional economic policy.

Background

Our industrial growth society is characterised by high consumption rates due to short product lifetimes, built-in obsolescence, fast-changing fashions and throw-away culture.

But we live in a world of finite and dwindling natural resources, and are already in global ecological overshoot where the earth no longer has the capacity to generate new resources and absorb waste at a fast enough pace to meet the increasing demands we are placing upon it. In 2007 the UK had an ecological capacity of 1.3 gha per capita but a footprint of 4.9 gha/cap[1]. Where is the additional capacity coming from? We’re using up our fossil acres, importing ‘ghost acres’ from other countries and drawing down from the future.

Economic growth cannot therefore continue indefinitely. Business-as-usual simply isn’t a viable option.

The current economic model has also failed to distribute wealth through trickle-down. Between 1960 and 2005, income inequality in the UK increased by 32%. In the USA it increased by 23%. In contrast, Sweden decreased income inequality in the same period by 16%[2]. The very rich are becoming richer and the very poor poorer[3]. In 2005, the top 5% of earners owned 40% of total UK wealth[4].

A different type of global economic system is needed that is both environmentally sustainable and socially just.

What should a successful northern economy look like?

On the regional level, a way forward is to build new local economies that address climate change impacts, work within natural resource limits, integrate business with society, and mitigate the effects of global economic instability. This type of local economy is more likely to create livelihoods that offer greater equality of opportunity for good quality of life.

Transition Network has been researching this area, and identifies several interconnected features to be key to thriving sustainable local economies. The idea is that these features interact with each other creating synergy with sustainability and resilience as emergent properties.

At the core of our model is the recognition of the interdependence between business, society and the natural world. When things happen causing disturbance, this system would be more likely to be resilient enough to continue providing good quality of life for its population.

The model presented here is a work in progress, and will continue to be adapted as we engage in discussion, test our ideas and receive feedback about how it works in practice.

1.     ADDRESSES CLIMATE CHANGE

a)     Increasing resilience to climate change impacts

Awareness of potential climate change impacts (flooding, drought etc) on the local environment and on the supply chain, identifying implications for local businesses and making the appropriate interventions.

b)     Making positive contribution to climate change

Businesses are carbon neutral or carbon negative.

2.     WORKS WITHIN NATURAL RESOURCE LIMITS

a)     Reduces dependency on oil-based products and processes through innovation of alternatives

b)     Reduces amount of natural resources used through greater efficiency and innovation

c)     Uses sustainably sourced materials

d)     Eliminates the concept of waste through closed loop, cradle to cradle and industrial ecology processes

e)     Incorporates natural capital accounting into financial management systems. The economic invisibility of nature’s flows into the economy has been found to be a significant contributor to the degradation of ecosystems and the loss of biodiversity  (The Economics of Ecosystems & Biodiversity Report for Business, UN 2010)

f)      Dispenses with concept of perpetual economic growth as a goal and adopts a dynamic equilibrium  model where the rate of inputs more or less equals the rate of outputs. Business would focus on meeting real needs rather than desires, thereby reducing level of consumption of natural resources.

3.     INTEGRATES BUSINESS WITH SOCIETY

a)     Creating shared value

Businesses and society need each other. Successful businesses need a healthy society: education, health care and equal opportunity are essential to a productive workforce. At the same time a healthy society needs successful organisations to provide the goods and services that meet people’s needs, create livelihoods, and enable good standards of living.

The mutual dependence of business and society implies that both business decisions and social policies follow the principle of shared value. That is, choices must benefit both sides.

b)     Redressing income inequality

Whilst diversity is essential for resilience, in our model of a thriving, sustainable and resilient local economy, the majority of organisations would contribute to greater income equality by generating ‘right sized’ profits that are distributed equitably within the organisation and through wider community ownership.

Profits would also be re-invested in developing the business and its social and natural environment (e.g. in skill development, and in supporting biodiversity and healthy ecosystems).

Fair trading and employment practices would also contribute to creating a society with greater income equality.

c)     Local benefits

There would be a high level of localisation where the value created through economic activity is kept as much as possible within the community. This can be achieved for example by sourcing materials and labour locally, and creating local currencies that encourage people to spend their money or trade goods and services within their community.

Localisation helps strengthen local communities and increases social capital, generating greater transparency and accountability between business and community.

4.     MITIGATES EFFECTS OF GLOBAL ECONOMIC INSTABILITY

Having a variety of different money/payment systems increases resilience, as the local economy is less reliant on any one system, and so it is less vulnerable to the effects of global economic instability.

These systems could include a local currency, LETS schemes and other forms of exchange.


[1] Global Footprint Network 2010

[2] The Equality Trust, Research Digest #2 2011

[3]  Institute of Fiscal Studies, 2011

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One Response to A new type of local economy

  1. Perfect. This is exactly what I’m interested in and have been for a couple decades. I’ve recently joined the Transition movement here in NY and am working on creating a Transition initiative in my own town…
    The hardest thing is to convince people that technology is NOT going to save our butts… That WE have to be our own heroes…. No one’s coming on a white horse with some brilliant idea to save us from our ignorance…. That the way “out” of the mess we’re in (no real way out, sadly) is to prepare realistically for all the issues you listed and accept the fact that things are going to be very different…. (yes, grief work is big part of this)
    Thanks for laying it all out so brilliantly.
    Good luck up there in Manchester! 🙂

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