Building Community Wealth in Birmingham
The Economic Justice Action Network pulls focus on community wealth building and how we might amplify this approach in our efforts to tackle the root causes of economic injustice.
In our Action Network meeting on 4th October we adopted the lens of community wealth building as a route to engage with the topic of economic justice. We began the session in small groups, orienting ourselves around how we might collectively define economic justice. Some emerging contributions included:
Equality of opportunity and access to services and resources
Allowing people to function in a society regardless of their circumstances
The importance of treating people as of equal worth — everyone has value and insights to bring
“Allocative efficiency” — using resources fairly and wisely
Economic justice must link to other areas of justice
No matter who you are you should have access to dignity and fair life
(These contributions and definitions will be collated and shared publicly as part of our suite of Action Network resources).
We then moved into the topic of community wealth building, with Conrad Parke from the Centre for Local Economic Strategies (CLES), introducing this progressive approach and its potential to re-model the economy in the city of Birmingham. During the meeting, many questions surfaced about community wealth building (CWB) and so we harvested some of these enquiries and Conrad has provided answers to them in this blog.
What is community wealth building?
Community wealth building is a progressive approach to economic development which sets out to retain more wealth and opportunity for the benefit of local people. It is a system-changing approach that works to produce a greater sharing of economic prosperity by ensuring that a greater proportion of wealth is retained and re-circulated in the local economies such that everybody benefits (the Local Multiplier Effect, see below).
This approach is in opposition to simply letting money drain away into the pockets of distant shareholders and the vaults of off-shore banks. It is also an approach that recognises that there is more to the economy than the private sector.
Community wealth building sees the public sector, voluntary sector, social care sector and all other ‘sectors’ as having equal importance to the private sector, in terms of both keeping the economy moving and creating economic opportunities we can all benefit from.
Why community wealth building?
I would argue we need CWB because we live in a city with some of the most disadvantaged neighbourhoods in the country, some of the highest levels of unemployment nationally, plus a multitude of other significant indicators of economic inequality and this despite Birmingham experiencing almost uninterrupted economic growth for the past 20 years. In fact, if you could take Birmingham’s GDP (gross domestic product — read the previous blog for reference) and divide it amongst every working person in the city it would result in an average income over £58k per person whereas the real average income is more like £28k per person*! This suggests that about half the wealth created in Birmingham is then leaving. Where to? Mainly shareholders, profits for big businesses, people who work in Birmingham but live and spend their money elsewhere and the inflated salaries of the already super rich.. Or, to put it another way, the problem underpinning Birmingham’s economic injustice is not a problem of needing to create yet more wealth, but a problem around where that wealth flows. That is why we need community wealth building.
* Economic Output in Birmingham 2020, Birmingham City Council.
What is the ‘Local Multiplier Effect’?
The local multiplier effect is the additional economic benefit generated for an area by increasing the amount of money spent, and is then recirculated, in that local economy. For example, it occurs when money is spent through local businesses and then those businesses, in turn, use that money to either buy locally themselves or pay wages to local people. In other words, a chain reaction in local economic activity.
How does community wealth building work in practice?
CWB works in practice by thinking a bit harder about the economic assets we have at our disposal and then working (‘sweating’) those assets harder to create greater local benefit. For example, the largest employment sector in the city is health with over 91,000 jobs* and yet we rarely look at the NHS as an economic asset. In addition, University Hospitals Trust Birmingham alone spends £1.5b a year on goods and services.
*Workplace Employment in Birmingham 2021, Birmingham City Council
A community wealth building approach asks the questions:
- How can we help these organisations become economic assets for the city?
- How do we direct more jobs within these organisations to communities where they will make the biggest difference?
- How do we direct more of these organisation’s spend to local businesses, thereby adding the greatest social value?
What are the other benefits?
As well accruing all the recognised wider social benefits that come from addressing poverty (improved health, reduced crime etc.) the CWB approach also aims to develop much stronger local economic ecosystems which, in turn, can help build stronger communities, greater social cohesion and social stability. In addition, by actively working to source jobs and spend locally it reduces the carbon miles spent on travelling to work and increases the likelihood of participation in active travel — both of which are good for the environment.
How do we measure community wealth building?
The big picture for CWB is to measure how much money is being retained in the local economy.
I currently estimate that about half the wealth created in Birmingham leaves the city, amounting to approximately £15b a year.
An increase in the wealth retained by the city of just 10% would mean an extra £1.5b for the Birmingham economy, which translates (very roughly!) to about 50,000 more jobs. A different way to measure is to look at the spend and recruitment patterns of large institutions (health trusts, local authority, universities, colleges, housing associations) to see what proportion is ‘staying local’ and whether this proportion is increasing.
How do we monitor the social value of community wealth building?
I would advocate for a simple approach. So for jobs I would monitor whether recruitment rates are increasing in communities which are traditionally seen as being trapped in low income and insecure employment. Then, whether we are seeing a rebalancing in the workforce with more people in work from traditionally underrepresented groups in terms of age, gender, disability, ethnicity etc. As for spend, I would track whether an increase in local spend is also being reflected in an increase in spend-through to businesses that represent greater social value by their very nature — i.e. small or micro businesses, social enterprises, co-operatives, etc.
Which cities are doing community wealth building well?
CWB has been adopted as national policy by the devolved governments in Scotland, Wales and N. Ireland. In England it is being adopted at local authority level with two of the leading authorities being seen as Preston and Greater Manchester Council. In Europe I would recommend taking a look at Rotterdam in the Netherlands. But the real home of CWB is actually Cleveland, Ohio in the USA. Here is a link to Cleveland’s Evergreen initiative, where the aim is to create meaningful jobs, employee ownership and profit-sharing opportunities in the locality.
How do new arrivals into areas impact community wealth building?
I cannot claim to be an expert on this issue but from my own experience I think new arrivals frequently add a real dynamism to a local economy by creating businesses that serve the specific needs of that community (food, fashion, legal services, etc.). They can also bring much needed skills. I was involved in a project that in just three years found 350 new arrivals in Birmingham with overseas health qualifications such as nurses, midwives, paediatricians and even an eye surgeon.
Where in Birmingham feels ready for action and change when it comes to community wealth-building capacity?
So far I have written about the need to look at the big institutions in the city (hospitals, universities, colleges etc) as economic assets. These are sometimes referred to as ‘anchor institutions’ because they are not going anywhere. However, to unlock these assets for a local community it is essential to also have ‘community anchor institutions’ that can act as the link between local people and opportunities that exist within big institutions. By ‘community anchor institution’ I mean the type of local organisation that has the reach and trust in local communities that big institutions do not have. Therefore, areas in Birmingham that are ready for CWB are those areas that are rich in local community anchor institutions.
You can read more about community wealth building here and you can contact Conrad for further discussion about community wealth-building via email. If any of this content piques your interest then you can join us at the next Action Network meeting, taking place on Wednesday 29th November, 11.30am — 2.30pm. Refreshments and lunch will be provided. Please sign up via this link if you would like to attend.
