Community Wealth Building

Framing

Community wealth building starts from the problem that wealth produced in a local economy does not stay there. When large retailers and outside firms transfer revenue out of the area and public procurement is awarded to non-local corporations, the local circulation of income is broken. From this diagnosis, placing the ownership and control of wealth locally becomes the policy objective.

The approach differs from attracting growth. Where development strategies based on inward investment and subsidies depend on the decisions of outside capital, this model starts from redeploying the institutions and assets a place already has.

Components

Four instruments combine. First, shifting the procurement of anchor institutions: large purchasers fixed in place, such as universities, hospitals, and municipalities, create stable demand when they direct procurement to local suppliers. Second, living wage policy, which raises wage standards in the public sector and among contractors and so increases local spending. Third, fostering cooperatives and social enterprises, which places the ownership structure itself locally. Fourth, local banking and public financial institutions, so that credit circulates within the area.

The combination was formulated by The Democracy Collaborative in the United States in 2005, with the Cleveland Model as an early application. Preston in the United Kingdom afterwards applied it systematically at local-government level and became the most widely cited case, using procurement analysis to identify spending that had been leaking out of the area and redirecting it to local suppliers.

Assessment and questions

Assessment of results varies with the indicator. Improvement is reported in direct measures such as the local share of procurement and wage levels, while some assessments find little change in aggregate measures such as employment and poverty. It is also noted that applicability varies considerably with a local authority's fiscal capacity and the scale of its procurement.

The theoretical question concerns the character of the model. A criticism that it is a reform operating inside capitalism and cannot change the structure stands against the reply that, because it turns on altering ownership, it is distinct from simple redistribution. Erik Olin Wright's work on real utopias took the second view and treated the model as a case of a non-capitalist economic form arising inside capitalism. The argument is the contemporary form of the question the free association of producers raised: how the forms of ownership and control are to be designed.