“You can’t trust other people. If it’s important, you have to do it yourself.”
Neil Gaiman, The Graveyard Book
As the book 99% explains, mass impoverishment is a serious problem in the US and the UK – and indeed several other countries. The book also sets out five steps that any government should take if it seriously wants to tackle mass impoverishment (and climate change).
In both the US and the UK, unfortunately, the governments currently in power show no sign of taking any such steps. In fact, they seem determined to move in the opposite direction. It sometimes feels as if there is no hope of improvement, and nothing that can be done to arrest the change. As if all we can do is wait for a change of government and hope that not too much damage is done before we get one.
Is that right? Is there really nothing that – for example – local authorities can do to improve matters in their own regions while we wait for change at the centre?
Fortunately, it is not. There are many things we can do. And they are beginning to happen. As Marjorie Kelly and Ted Howard of the Democracy Collaborative and co-authors of the book, The Making of a Democratic Economy explain,
“It reminds us of the period as the Great Depression was gearing up. The government at the time under Herbert Hoover was not coming to save anybody; it said ‘the free market’s going to handle the Depression.’ So, people in communities started innovating and creating really exciting new models to really take care of themselves.
And when the politics changed under Franklin Roosevelt in the New Deal, his government looked around the country at these little models and scaled them up into things like the Social Security system, our most important social safety net.
So, our view is that every community has many, many innovative models — public banking, cooperatives, land trusts, employee ownership, social enterprise. And they just need to be developed so that when the time’s right, they can take center stage in the economy — not be the alternative — be the defining characteristic of America’s economy.”
This was true of America during the Great Depression. It is also true of Europe now.
In Europe, we can see innovative new approaches being developed in relation to:
• public procurement – as seen in Preston;
• supporting businesses – as exemplified by Mondragón; and even
• thinking about currency – as in the town of Lewes.
And as Kelly and Howard point out, the success of these approaches provides a blueprint for future governments to roll them out more widely – fact-based policy as 99% calls it.
Procurement: The Preston Model
Something dramatic has been happening in Preston. In 2015, Preston was one of the most deprived cities in the UK. In 2019, PricewaterhouseCoopers did an assessment of the most improved communities in the UK; and their number one was Preston.
As Preston councillor, Matthew Brown explains,
“People [were] angry with how the economy is structured… Poverty was entrenched. We were in the bottom 20% of the index of multiple deprivation. In the most prosperous ward you would expect to live to 82, and other wards 66.
What we’re doing now is in response to that, it’s about how we can change local economies to work for people who feel excluded.”
The Preston model is complex in detail, but simple in essence: spend more money locally to regenerate the local economy. Starting in 2015, the local authority:
• began to pay all its employees a living wage;
• carefully reviewed its procurement policies and identified that a huge proportion was spent outside Preston, and indeed outside Lancashire;
• set out to spend locally wherever possible.
The results look like this.
Even though, because of funding cuts, total expenditure has fallen, the absolute values of spend within Preston and within Lancashire have risen dramatically.
As the Guardian reported, based on the PWC/Demos research,
“Research carried out by the accountancy firm PricewaterhouseCoopers and the thinktank Demos, which used a range of measures including employment, workers’ pay, house prices, transport, the environment, work-life-balance and inequality to rank 42 UK cities, found that Preston had improved the most in its 2018 Good Growth for Cities index.
It said the city was better to live in than London on the index, which attempts to assess the quality of life in cities across Britain beyond traditional economic measures such as gross domestic product.
Preston has experienced a large reduction in its unemployment rate, down to 3.1% last year compared with 6.5% in 2014, while it has also seen improvements above the national average for health, transport, the work-life balance of its residents, and for the skills among both the youth and adult populations.”
Preston has far to go, but this is a remarkable result.
Supporting Business Regeneration: The Mondragón Model
The Mondragón model is based on the idea of workers co-operatives as an engine of regeneration.
In 1956, when the Basque region of Spain had still not recovered from the effects of the Spanish Civil War, the first Mondragón cooperative was formed. From that initial cooperative, the movement has grown into over a hundred worker-owned cooperatives in sectors including retail, distribution and finance with a combined turnover of over €12 billion.
They are cooperative not only internally – the ratio of frontline pay to CEO pay is capped at 1:9 compared to the 1:129 average found in FTSE 100 firms – but also externally in the that they cooperate with each other and provide support services to one another. Democratic practices are entrenched in the operation of all organisations with a one person, one vote system on all key corporation decisions.
In addition, all of the cooperatives contribute to a collective ‘solidarity fund’, used to compensate losses experienced by other members of the group. An established practice of relocation also helps to protect those within the group from job losses if a company does face closure. The group further places a focus on investing in socioeconomic development for its members, through a collective reinvestment of profits into employment creation and education.
One key engine of growth has been finance. Mondragón created a cooperative bank that has helped fund the creation of newly formed cooperatives in the movement, in addition to aiding existing ones. Despite initial efforts to keep every aspect of the corporation local, Mondragón felt it necessary to spread their labour force in the face of global competition: the cooperatives now own factories or other companies in Vietnam, Chile, Russia and Morocco. Thus, the expansion means that more than half of the current total 80,000 Mondragón workforce are not now members of a cooperative, leading critics to question the on-going fairness and sustainability of the model.
Nevertheless, this is a remarkable success story for the cooperative movement and demonstrates that it can be scaled up well beyond cottage industry scale.
Local Currencies: The Lewes Model
The Sussex town of Lewes has taken a bold step: in 2008, it introduced its own currency, the Lewes Pound.
The Lewes Pound does not replace the Pound Sterling; it operates alongside it. The objective is to strengthen the local economy by spending locally.
The Lewes Pound operates using a simple model:
- Lewes Pounds (LPs) can be bought and sold at issuing points in the community. People can also get Lewes Pounds by asking for them in their change when they make a cash transaction. The Lewes Pound is issued at parity with Sterling, i.e. 1 Lewes Pound is worth 1£ sterling.
- Citizens and traders can use their LPs to pay for any transaction with an outlet that accepts the LP.
- Once traders have LPs in their tills, they can give them back as change, use them to pay their suppliers or employees, use them for their personal transactions or trade them back at an issuing point.
Twelve years later, the Lewes Pound is accepted by many local traders – and this is what gives it value to consumers. Once a consumer has Lewes pounds in their purse, they are incentivised to spend it locally. There is an obvious economic effect; and a less obvious environmental effect in that local products, by definition, do not have to be transported over very large distances to reach consumers.
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All three of these examples show that it is possible, even locally, to challenge ideas that might be seen as fixed nationally, globally or even by cast-iron laws of economics. Who would have thought that procuring other than from the cheapest source might make economic sense? Who would have thought that a business model which deviates so much from accepted practice could succeed at scale? Who would have thought that a small town could benefit from having its own currency, which is not even legal tender?
In all three cases, the only real barrier to action was that we have been told that this sort of idea makes no sense. Once we question that received wisdom, we begin to see the possibilities.