(Re-) Localization:                                                                                        -Why going Local? (It’s the Local economy, stupid!)                               -Basis for Economic Democracy

“Somehow we have lost touch with one of the fundamentals, namely, what is the proper scale of things? And when the scale is wrong, then there is violence.”

 E.F. Schumacher, “A Lecture on Nonviolence,” February 1977, quoted in David Bollier (2021): The Commoner’s Catalog for Changemaking, section: Relocalizing the Economy

«Behind all these ‘meanings’ of globalization is a single underlying idea, which can be called de-localization: the uprooting of activities and relationships from local origins and cultures. It means the displacement of activities that until recently were local into networks of relationships whose reach is distant or worldwide.»

Gray (1998): False Dawn: The delusions of Global Capitalism, quoted in Rory Ridley-Duff and Mike Bull (2019:103): Understanding Social Enterprise Theory and Practice [emphasise added]

 

Localization seen from different angles

  • Principally, localization mean the process of organizing business, industry and processes, so that its main activities happen in local areas (at community or regional level) rather than nationally or internationally. Rational for these processes are typically to address inequality, social and environmental sustainability,-and to build a stronger democracy.

The community level is illustrated by the Left-Libertarian (2013) [1] which likens localization with the village of older times, where:

    • «..most of the needs can be met within the community including food resources, access to green spaces, clean water, entertainment, culture, civic centers, places to shop and work.
    • Localism means walkability, the capacity to walk (or bike) to any of these places without getting into a car and driving through suburban sprawl.
    • Localism also means that we aren’t shipping things from around the world to the local community.. »
  •  However, it can also be seen as a principle of global responsibility, but acted upon at the city scale, as per Kate Raworth’s argument that cities must take on global responsibility for their [own] supply chains. This particularly addresses social and environmental sustainability:

         «..we have to recognize that every city draws on resources from the world, draws on materials through global supply chains.. So how do you ensure that your city respects the health of the whole planet and  

    • is not causing deforestation in the Amazon
    • is not causing mineral extraction to make the phones..
    • have all the resources that go into the clothes we wear, the food we eat, the electronics we use, the construction materials that build buildings we live in.

        And lastly, think of the people in those supply chains, the people who stitch and sew your clothes, who pick and pack your food, who assemble your mobile phone, who dig and transport your construction materials for your buildings. What are the conditions under which they work? So how is your city related to labor rights through global supply chains ..

[This] place the local aspiration of a city in the context of global responsibility. »  

Shareable (March-21): Kate Raworth: Doughnut Economics at the City Scale; video transcript

 On climate, Brown and Jones (2021) [2] argues that «the practical implementation of these still mainly abstract principles [of the Green New Deal] ..depends on governments being amenable to these policies or open to pressure for them from below. Localism can be a key part of addressing this urgent challenge without waiting for permission or guidance from above. Already, more than 2,500 cities have formulated plans to reduce their greenhouse gas emissions that go beyond the proposals of their respective governments

 

Localization at the regional scale, seen through the lens of value chains  

“Regional economies produce and distribute the basic needs of our communities, building local self-reliance in food, fiber, energy and building materials. By reducing the need to import goods from outside corporations, we can prevent capital from leaving our region and build community wealth and resilience.

 The climate crisis brings urgency to building self-reliant regional economies. Local production decreases dependency on global supply chains easily disrupted by increasingly chaotic weather, social upheaval, and global pandemics, while reducing the carbons of long distant shipping. Local production of basic needs prepares our communities and future generations to withstand climate change.

 .. What’s not available regionally, such as coffee, chocolate and tropical fruits, is imported through fair trade relationships that benefit the communities where products originate.”

[The organization All together now Pennsylvania]

 

Reducing Inequality: Why local ownership of businesses is important

We have earlier shown the relationship between inequality and ownership (cf. ‘Implications of Piketty’s research’) and stressed the need for ‘ownership system change’ (cf. ‘Tools for systems change’; Spreading Ownership, Wealth..) and to cooperative structures for how this currently is operationalized). Using the lens of localization, we further stress the importance of local business ownership for community economic and social well-being. According to the Seattle Good Business Network [3] (a coalition of residents, local businesses, non-profits, and municipal organizations):

Study after study has shown that the more locally owned businesses per capita that a community has, the better off that place is on many of the other indicators of community health. The larger the share of transactions in our economy—buying, producing, investing—that involve a locally owned business, the more thriving, equitable, and resilient our economy and community can be.”

Shuman (2002) [4] argues that:

«If you don’t address ownership, achieving sustainable development is virtually impossible. The main reason is capital mobility. Globalization has meant that a diminishing number of ever larger corporations are being lured to a diminishing number of communities around the world, and these communities are engaged in a fierce bidding war with one another that has led them to offer larger and larger bribes. ..The more of your economy that is locally owned, the more plausibly you can then raise labor and environmental standards with confidence that businesses will adapt rather than flee. »

Shuman (2015) further states that economic developers have been slow to recognize that the relative immobility of local business actually confers huge benefits on a community:

  • Economic-development investments in rooted local businesses are much more likely to pay long-term dividends to local residents than investments in fickle global businesses whose captains are inclined to take the money and run.
  • A community that doesn’t depend on global businesses will not be compelled to cut wages or weaken environmental standards to create a good “business climate.” Because local businesses are more will­ing than their global compatriots to adapt to higher standards rather than to flee them, they provide a better foundation for high-road economic development.
  • ..trust flows from longevity and reliability in relationships. The strangers in global companies who come and go..cannot possibly inspire much trust in the communities they aim to seduce. The local businesses that relate to community members for generations—as consumers, investors, suppli­ers, and workers—are more motivated to nurture their relationships. 
  • More than two dozen studies over the past decade have compared the economic impacts of locally owned businesses with their nonlocal equivalents, and they consistently show that local businesses generate two to four times the multiplier benefits. That means that every dollar that moves from a nonlocal to a local business in a community generates two to four times the income boost, two to four times the jobs, two to four times the local taxes, and two to four times the charitable contributions.                                                                                                                                                                                                             “

Michael Shuman (2015): The Local Economy Solution. How Innovative, Self-Financing “Pollinator” Enterprises Can Grow Jobs and Prosperity. [emphasize added].

But, as indicated by the Seattle Good Business Network, for local ownership to work, citizens needs not only to buy local, there must also be a certain degree of ‘producing local’ and ‘investing local’:

  • Buying Local Dollars spent with corporate chains quickly fly out of our local economy and don’t come back. Buying locally——by consumers, businesses, and local government——grows our local economy because of the powerful local multiplier effect.

          When you spend $100 with a local, independent business, most of that money stays here.. Those businesses then spend most of that money with other local businesses, and so              on. Your $100 has just multiplied, each transaction creating on average three times more income, jobs, and wealth for your community… 

  • Producing Local If what we buy locally isn’t also produced locally when possible, we cut far short the positive local impact of our purchasing. Producing more.. [locally] also creates a more diverse job base.. [plus, the aim of shorter, ‘end-to-end’ value chains, associated with a circular economy, becomes more realistic].
  • Investing Local If we’re .. not investing in the stability and growth of those enterprises, we starve our economy and ourselves. Seattlites hold approximately $70 billion in long term savings, almost none of which is invested in locally owned enterprises..[There are vast pools of capital in the investment portfolios of local anchors,[5] in personal and institutional bank deposits, and in our pension funds and retirement plans—imagine what’s possible if these investments were put to work locally building community wealth, rather than fueling Wall Street.. (Democracycollaborative.org) 

Community Capital [6] [e.g. through credit unions and community shares] is the growing movement to correct this imbalance..

                                                                                                                                                                         ”

Michael Shuman (2015): The Local Economy Solution. How Innovative, Self-Financing “Pollinator” Enterprises Can Grow Jobs and Prosperity. [emphasize and text in brackets added].

 

Addressing ecological sustainability through localization & community/public ownership

 According to Alperovitz (2021):

« By ‘internalizing externalities’ a community-inclusive approach..is critical to the nurturing of economic and institutional power relation­ships that help rationalize environmental choices.

Contrary to situations in which private businesses may pollute—and the community through government must intervene as an opposing regulatory force—when the community itself is directly involved in, for instance, a community owned utility, the question posed is whether it wishes to pay the costs of cleaning up the problems its own activities create.

..To the degree a community or neighborhood owns significant economic enterprises, ecologically sustainable practices become far less contentious.

Unlike..regulation of pri­vate firms—which inherently creates conflict between public and private interests—in models that include community ownership the regulatory choice is rationalized since the costs of responsible environmental practices are both paid for and simultaneously largely benefit the same entity: the community or municipality that owns the firm. »

Gar Alperovitz: A Pluralist Commonwealth and a Community Sustaining System in: James Gustav Speth and Kathleen Courrier (ed.) (2021): The New Systems Reader. Alternatives to a Failed Economy [emphasize added. Order of text rearranged]

Alperovitz’ argument appears to be supported by the case of the small German city of Feldheim:

«..Located about an hour and a half south of Berlin, this modest but well-kept village has been energy self-sufficient for more than a decade… Letting locals participate in and benefit from the project was key to Feldheim’s success.. »

Euronews.com (Sep.22): Energy: The self-sufficient German town that gives back to the grid

See also 8 min. video from September 2022

 

The democratic argument for localization

Alperovitz (2021) ,[7] render several quotes, starting with the English philosopher John Stuart Mill (born in 1806) who insisted that direct experience with local governance was essential to ‘the peculiar training of a citizen, the practical part of the political education of a free people.’:

We do not learn to read or write, to ride or swim, by being merely told how to do it, but by doing it, so it is only by practicing popular government on a limited scale, that the people will ever learn how to exercise it on a larger. 

Alexis de Tocqueville similarly stressed that “municipal institutions con­stitute the strength of free nations. Town meetings are to liberty what primary schools are to science; they bring it within the people’s reach, they teach men how to use and enjoy it.

In his call for “strong democracy” the late Benjamin Barber also stressed the role of direct participation in cultivating public-mindedness..:

…strong democracy relies on participation in an evolving problem-solving community that creates public ends where there were none before by means of its own activity … In such communities, public ends are neither extrapolated from absolutes nor ‘discovered’ in pre­existing ‘hidden consensus.’

They are literally forged through the act of pub­lic participation created through common deliberation and common action and the effect that deliberation and action have on interests, which change shape and direction when subjected to these participatory processes. 

 

Inequality and Democracy are closely related

 Guinan and O’Neill (2020) argues that inequality and democracy in local economies are closely related to one another, and mutually reinforcing:

“Democracy cannot take firm root in a society where economic hopelessness undermines a sense of political agency, where deep social inequalities make citizens into mutual strangers, and where economic instability precludes active determination of a community’s economic development..”

Joe Guinan and Martin O’Neill (2020:54): The Case for Community Wealth Building

This sentiment seems to be echoed by Thomas Piketty (in A brief history on equality -2022) who says one risks losing the climate battle and the conversion to a green economy if not also addressing economic inequality.

 

Notes:

[1] The Left-Libertarian (2013): The Commons – Beyond the State, Capitalism, and the Market [emphasize added].

[2] Matthew Brown and Rhian E. Jones (2021): Paint your town red. How Preston took back control and your town can too. [emphasize added]. 

[3] https://seattlegood.org/case-for-local/ [emphasize added].

[4] Michael H. Shuman (2002): Going local: New opportunities for community economies [emphasize added].

[5] ‘Anchor institutions are nonprofit institutions that once established tend not to move location. The largest and most numerous of such nonprofit anchors are universities and non-profit hospitals (often called “eds and meds”).’ See https://community-wealth.org/strategies/panel/anchors/index.html

[6] See http://commcapseattle.org/community-capital-101/, http://commcapseattle.org/funding-tools/ See especially Reward Crowdfunding. Reward crowdfunding, community supported agriculture (CSA), and pre-sales offer entrepreneurs an opportunity to raise capital without giving away ownership (or more ownership!) of their companies. With each of these tools, goods or services are provided in exchange for capital instead of a financial return. See http://commcapseattle.org/funding-tools/reward-crowdfunding-csas-and-pre-sales/a-buzz-worthy-csa-csa-case-study/

[7] Gar Alperovitz: A Pluralist Commonwealth and a Community Sustaining System, in James Gustav Speth and Kathleen Courrier (ed.) (2021): The New Systems Reader. Alternatives to a Failed Economy  [Emphasize added]