The failure of community economic development

The failure of community economic development

I began my professional working life in the field of ‘community economic development’ (CED) and ‘local economic development’ (LED). These models of development provide an important contribution to understanding the problems facing local communities, but they are often seen as a poor cousin to ‘real’ economic development. Whilst this is unfair, it is not completely undeserved.

LED has a little more cachet because of its roots in economic geography and the role of territory. See, for example, the London School of Economics’ What Works Centre for Local Economic Growth and the OECD Local Economic and Employment Development (LEED) Programme. In contrast, CED has often been lumped into the ‘softer’ category of community development.

Social and community systems and organisations play a powerful role in achieving economic outcomes. Look no further than Putman’s work on social capital, social trust and the role of social organisations. The field of behavioural economics, with its roots in sociology, psychology and ‘choice architecture’ also provides insights into how social and community systems can influence economic decisions and outcomes. This year’s winner of the Nobel Prize in Economics, Richard Thaler, has done much to legitimise this field. We’ve also witnessed increasing interest in the role of political institutions and economic development. Political economists help us better understand the interplay between economics and politics and its effect on economic growth. There are also specific models of business and development directly related to CED. These include third sector developments such as co-operatives and various other forms of social and community enterprise.

These models explore the connections between economic and social systems. They are used to guide development policies and programmes that integrate these systems. Too often, economists will focus on growth, without recognising the other goals required for sustainable quality of life outcomes.

Each of the examples above provides important and valuable contributions to understanding economic development. They apply a specific lens to the challenges faced by governments and economies. While some will be more suited to one context than another, they each provide a specific perspective through which to consider why development is or is not occurring. Sadly, CED has been a weak contributor to this.

In general, CED is described as a ‘bottom-up’ approach to development in which the beneficiaries of development are its protagonists. The Canadian CED Network describes CED as ‘action by people locally to create economic opportunities that improve social conditions, particularly for those who are most disadvantaged’. Co-operatives UK, says CED is ‘unlike conventional approaches to local economic development’ because it is ‘a process that is led by local residents and focuses on generating wealth and jobs that stay local’. Co-operatives UK says CED is a way ‘to give people real power in the local area’.

As CED advocates position themselves away from ‘conventional’ economic development, this model is largely considered a social instrument, rather than an economic one. This framing has contributed to the marginalisation of CED from mainstream economic development. There are two contributing reasons for this.

First, CED is often called upon to do the impossible. It is typically applied in disadvantaged communities and among those reeling from some kind of economic or social shock, such as the closure of a major industry, natural disasters, refugee and migrant communities, and even after violent conflicts. In these cases, the social case for development is clear and the need to deal with the economic base to fragility is recognised. But succeeding in these places is tough. Moreover, CED is often provided with very limited resources. While the challenge might be great, the resources applied are minimal.

Second, there is very little consideration of the actual impact of CED programmes. There are very few clear evaluations of the overall impact of CED. Armstrong and Wells (2006) find that the methods for evaluating the net economic impacts of CED leave much to be desired. While it can be difficult to accurately estimate employment and other net economic impacts of CED, these researchers also find that many proponents of CED are ‘either opposed to the use of orthodox economic evaluation of their policies or are at the very least highly sceptical of such methods’. They prefer ‘softer’ qualitative and capacity-building indicators.

A recently released report by Co-operatives UK illustrates these points. This report, which was released on 17 October 2017, documents the lessons learned from a two-year nationwide action research programme on CED. This programme provided 71 grants of up to £5,000 to disadvantaged communities. These funds were directed to communities that ‘included at least one ward in the 20 per cent most deprived in England based on the Indices of Multiple Deprivation’. With this money, and four hours support from an advisor, these communities were required to produce a CED Plan. The grant could be used to fund various activities including community consultations or additional technical advice. The purpose of these plans was to set out a clear vision for the local economy ‘with distinct and achievable concrete projects or activities developed which could contribute to achieving the vision’.

So, to the first point on high expectations and doing the impossible: In some of the most disadvantaged communities in Britain, £5,000 was provided to produce an economic plan.

Most of the economic reports and plans I’ve seen would spend this amount money on their artwork alone. While I am not in favour in expensive or glossy plans, these resources re clearly inadequate for producing an evidence-based plan on which a broad cross-section of the community has contributed to and agreed on. This approach sets up local, community-based organisations for failure. Or, at the very least, it limits the scope and value of their contribution to the critical economic challenges they are facing.

While the Co-operatives UK report considers the outcomes of this programme, this is not a full account of the programme’s impact. Indeed, it would be hard to know what outcomes this process could achieve. Instead, the study is based on case studies and interviews with 38 programme participants.

The report finds it ‘is not possible to judge at this stage is the quantitative impacts’ of the programme… This would only be possible to analyse through a longitudinal study of the implementation of the plans over a five to ten-year period’. Despite this, the authors suggest that the most effective approaches to CED focus the community’s energies on taking control of a particular asset or building on existing local plans to transform processes not previously working for the local community.

Perhaps unsurprisingly, the report finds that these communities require a ‘longer timeframes and greater resources’ if they are to ‘deliver deeper and more sustained impact’. Furthermore, many communities struggled to establish effective relationships with stakeholders who held power or mandate, such as the Local Economic Partnerships, planning departments or procurement teams. Most CED Plans were not aligned with conventional measures of economic development.

Working with local communities to support bottom-up initiatives for local economic and social development is essential. This should not be treated as an alternative or unconventional approach to economic development. Recognising the importance of social systems and structures, including community organisations, as well as social norms and attitudes, is critical to good development work. So too is critical, evidenced-based analysis of the economy and its markets. Much more needs to be done to critically evaluate the contribution of CED to sustainable development outcomes. This requires both ‘hard’ and ‘soft’ measures. CED advocates should be prepared to engage economists on how these models can be better understood, critiqued and applied.