AXIS Performance Advisors

Demystifying sustainability

Community-Based Economic Development

A smarter strategy for the new economy

by Darcy Hitchcock

Images courtesy of visual facilitator, Claire Bronson.

© Copyright 2011 AXIS Performance Advisors

What’s Wrong with Economic Development?

Everyone wants to grow jobs. But in this economy, there are a few problems with the traditional economic development model (which has tended to focus on bringing in big firms from elsewhere with big tax breaks to provide jobs which require skills our unemployed don’t have.)

  • Big firms are not the source of new jobs. Companies with fewer than 20 employees add the most jobs and large firms are shedding jobs.
  • It can set up a zero-sum game. When companies move (as opposed to set up new operations), they can devastate the community they are leaving.
  • These enterprises are more likely to pick up and leave since the investors aren’t grounded in the community.
  • The tax breaks undermine one of the main purposes of economic growth, to bolster tax revenues to provide local services.
  • The companies are often focused on the export market, which can lead to higher greenhouse gas emissions and various social impacts.
  • Because these enterprises often have home bases elsewhere, the capital leaves the community faster (what Jane Jacobs called a desert economy).
  • The organizations tend to be shareholder driven rather than stakeholder driven, so the wealth created tends not to go to the people doing the work but rather gets concentrated in the hands of a few, making our inequitable society even more so.
  • It sets up the need for workforce development training, which still leaves a large percentage of our population behind.

Community-­‐Based Economic Development (CBED)

A community-based economic strategy might look like this:

Local citizens investing in…
Local businesses that employ…
Local people who need jobs to serve…
Local needs.

So how might this work? We convened a group of people in Portland, Oregon to explore this idea. We cataloged our existing resources and discussed what would need to happen to accelerate this work by Factor 10. What follows is based on that conversation.

 CBED_templateDRAFT

Sea of needs

I’m in the Pacific Northwest, so let me use a salmon analogy. Out in the sea are disorganized clusters of community needs and people wanting work. Somehow we need to bring them closer together so that a business opportunity can emerge.

What does the community need? We don’t want just any enterprise. Wouldn’t we rather grow enterprises that address local needs? So how do we figure out what the community needs and then promote organizations that will help address those needs?

Who needs opportunities? In this economy, we don’t just have the traditionally hard-to-employ population. We also have laid-off Baby Boomers who will likely never get another traditional job. And we have entrepreneurial young people coming out of school filled with idealism and disinclined to climb someone else’s ladder. These three groups have synergistic qualities.

What if, once a community need was identified, we gathered up people from all three of these groups to work together to create their own opportunities? Stop waiting for someone else to create a job for you. Make your own!

Streams of opportunity

Once an enterprise or project is envisioned, then they fall into three streams or
categories:

  • Projects or initiatives that don’t require a new legal entity (eg, projects that come through the Oregon Solutions process)
  • Local businesses/organizations that predominately serve people locally (eg, a local restaurant or accounting firm; likely small to medium sized enterprises (SMEs)
  • Traditional businesses — which have historically been the focus of economic development — where an individual business may be expected to provide many jobs and the business strategy typically involves serving people outside the community (eg, exporting products to Asia or providing services in other states). The reason we have distinguished between these three streams is that the organizations set up to serve them tend to be different. For example, projects tend to get funded by foundations whereas traditional businesses may get funding from venture capitalists or angel investors.

Note here that I have not ruled out traditional business; but in this context, we see them being formed as a defined local need.

All three types of opportunities, my salmon runs, have to navigate a series of hurdles to make it to the spawning grounds of new opportunities:

  • Refine the strategy
  • Fund the enterprise
  • Launch the effort
  • Provide ongoing support

Community—Asset Map

With this structure, you can begin to identify resources you have in your community to support this. We did this in Oregon and found a host of existing organizations. We also found areas with few or little support (especially for those in the sea of needs). You may not be surprised to see that most of the resources were after an enterprise was envisaged, once the salmon had started up stream.

CBED_resourcemap_090111

And the most resources of all were devoted to supporting existing traditional business. Hmmm. Granted, this is not a complete list of services but there definitely seem to be trends. We have no robust infrastructure for figuring out what the community needs or matching them to people who need work-related opportunities! [Note: The yellow Post-It’s represented resources from an existing Portland Development Commission matrix.]

So what’s needed?

How do we get information about community needs better, faster, cheaper? Funding is weak for community assessments. Can we leverage crowd-sourcing, smart phones and the like to do rapid market research or poll for priorities? What if high school kids had an app that turned them into pollsters as they went around town, gathering data about community needs? Can methods like participatory budgeting engage a community that has lost its mojo?

How do we redirect much of the capital that is going to the old economy to a community-based strategy? Communities are experimenting with local investment systems, redirecting money from Wall Street to Main Street.

How do we help people make their own opportunities using skills they already have? Imagine helping immigrant populations develop community gardens to grow special produce unique to their traditions and then setting them up with food carts so they could sell to locals, outside offices, and serve as Meals on Wheels.

Can we combine these three populations (traditionally unemployed, Boomers and young people) into viable social enterprises? Stop trying to ‘fix’ them in silos. Connect them! How do we help people who may feel disempowered to be more entrepreneurial?

What needs to be done to bolster the informal economy? Would time banks or alternative currencies provide a medium of exchange for people without much money?

How do we develop enterprises that are humane and democratic, like employee-owned cooperatives,  where people have a voice in matters that affect them and the lion’s share of the wealth goes to those who do the work?

How do we organize these existing resources in a way that creates synergy and accelerates progress? How do we increase by a factor of 10 the conversion of community needs into viable enterprises, employing people who want to contribute?

CBED_rampitupconversation_090111

I have more questions than answers but perhaps together we can figure it out.

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