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Beyond extraction: The political power of community wealth building.

Martin O'Neill (MO'N): I'm delighted to meet you here in Preston, and thanks for finding the time to talk to Renewal. We've been taking an interest in the development of ideas of community wealth building, and the success of the Preston Model developed by Councillor Matthew Brown and his colleagues. (1) So it's great to be able to talk with one of the progenitors of this kind of local economic policy. I know that you've been talking to people at the Cabinet Office about the potential of community wealth building, and that it's an interesting feature of these ideas that they have an appeal across the ideological spectrum. That naturally leads to an interesting question about how one should think about the justification for these kinds of community wealth building policies. Matthew Brown here in Preston, as you know, takes a very radical approach. He sees this as part of a strategy to create a very different economic model, moving well beyond neoliberal capitalism. But as you've said, on the other hand, one interesting feature of these sorts of policies is they can be represented as being simple common sense, and endorsed by some people who don't have any systemic critique of capitalism, simply as a pragmatic form of local economic development. And I wonder whether you think there's a tension between the 'broad church' case for community wealth building, and the more radical potential of these policies.

Ted Howard (TH): I don't think there's a tension, at least at this point in time, for the development of this strategy and model. In the United States, our organisation, The Democracy Collaborative, is working at any one time in roughly ten different cities and communities, brought in by mayors or large institutions--universities, hospitals or local philanthropy. And while it tends to be that the people we work with are Democrats, we also work very productively with very risk-averse large institutions like hospitals, and with, on occasion, Republican mayors in cities. And at this stage of development when you're talking about localising procurement, keeping money in your community, bringing more people into the economy so they can participate, supplementing wages with asset accumulation strategies through mechanisms like employee ownership, I think this has a great deal of appeal.

In the United States, of course, you have the Red-Blue divide. And at the federal level everything's polarised and nothing can get done. But in individual communities, there's often a much more pragmatic kind of discussion. And so at this stage of development, where things are being modelled and prototyped and piloted, I don't think there's a tension. Down the road, one can imagine that arising. You know, if you look at some of the consequences of this, you start to see very large order changes in the big national political economy. But right now we're working at the level of communities, and those tensions don't really arise.

MO'N: Could you say a little bit about what you think those larger order, systemic changes would look like, that would happen if the community wealth building model was developed further? Could you give our readers a sense of what some of those deeper developments would be like?

TH: Well, this is very much what our Next System Project is engaged with, with questions like what is the design and the architecture of a system beyond corporate capitalism as we know it?2 And no one's got the monopoly on having figured out what that system looks like. But I think we know there are certain design elements that would inform a larger order system. And one certainly is broadening ownership and democratic control over capital, over business, over wealth.

And so you imagine in communities, rather than their economies being governed by large corporations with absentee owners or investors who don't live in the community and don't care about the community, you have an economy that's going to be much more dominated by the locally owned businesses that are broadly owned in some way, not just an individual entrepreneur and a bunch of people working for him or her. But instead with a greater role for big cooperative businesses, community owned and municipal public enterprise businesses. So that's one feature, I think, of the new economy.

I think another one has to do with getting out from under the thumb of the big financial institutions that control investments and flows of capital. And therefore, I think the strategy of, at this point, local public banking, and community controlled financial institutions, places where municipal authorities are doing your banking rather than the banks based in the City or on Wall Street, is important. I think that's another feature of this approach.

One very important question is what kind of economic system can be ecologically rational. And it's not going to be one that is predicated on a growth paradigm like we have now, that says that the whole point of the economy is just to have growth for growth's sake, with the idea that everything should be measured with gross domestic product and how it increases. And all of the externalities of that growth get layered on to society to deal with.

So, taking the whole picture--and no one's figured this out in full detail--but we have to think about how to meet people's basic needs under conditions potentially of lower levels of economic growth. And so that, ultimately, starts to bring you to distributional questions. Because the way we've always tried to handle lack of distribution of resources is just to keep growing in the hope that everything will trickle down. But instead, distributional questions need to be addressed more directly. And certainly in the United States, which I know a lot better obviously than Britain, a feature of the next system has to be really predicated on racial inclusion and equity. In the US we see deep poverty in some of our disinvested communities, and these are often communities of colour. That's another aspect. So, those are some of the elements that any thinking on the next economic system needs to address.

And I think the fundamental principle is: in the system we have now, capital is in first place over labour. And so capital determines what's going to happen. And when capital gets into trouble in the financial crisis, the logical thing to do is eliminate as much labour as possible to cut costs. In the system we want to create, capital is a necessary ingredient to make anything happen, but labour should be in first place over capital when decisions are made about the direction of the economy, particularly in difficult times.

MO'N: I think that's a very interesting way of framing it. When Ed Miliband spoke here in Preston last autumn, at a conference on the Preston Model, he rightly said that it's easy to underestimate the radical ambition of this model. It's not just about promoting the local versus faceless corporate procurement, but actually, it's more fundamentally about the balance of power in the economy, and the balance of distribution between capital and labour.

You may have seen that, where Renewal goes first, the Economist arrives two years later. And there was recently a piece in the Economist (19 October 2017) that looked at the Preston Model as one of the central planks of the emerging new economic model in Corbyn's Labour Party, and a harbinger of what may be to come. And the Economist advanced some fairly predictable criticisms of this approach, and ones that you must hear all the time. So, I'd be interested in your response to what we might call the 'economists' critique' of community wealth building, that says, look, this is just a form of local protectionism, and it's destroying gains from specialisation and gains from trade across communities. It's a form of protectionism that's just going to just end up being a 'beggar thy neighbour' set of policies. So, on this view, although there might be some benefit from localising various sorts of economic decision making, the cost of that is going to be a drop in economic efficiency, and that actually is going to end up hitting the poorest, most disadvantaged people who could have benefitted from a more efficient economic system...

TH: Because the people making that critique care so much about the poor and disadvantaged, the people at the bottom of the spectrum, right?

MO'N: Well, you know, (chuckles), that's a fair point, but do play along with me. If that critique is understood to be sincere, at least, then what do you make of it?

TH: I do hear that 'economists' critique' and it's a line of attack that the forces of the status quo and the forces of capital and large corporations will try to drive across. It's one that misrepresents things to confuse people.

There are a number of answers. One is that at this stage, certainly, the pendulum has swung so far to the other side, away from local economies and towards corporate capitalism, that if you look at what they've done in Preston so far, they've been able to re-localise something like 18 per cent of their spend. There's still 82 per cent that's not there. So on one hand you could say there's some attempt here to find a ground that's other than we have, which is an extractive economy that just keeps sucking wealth out of the community. But I think it's just nonsensical to think that what we're going to do is create a thousand little city states all at war with every other one, with their moats and walls around and everything internalised. At this stage at least, it's just about re-setting the balance between local communities and transnational corporate capital.

MO'N: One thing that's very interesting about the British case, and it's similar of course in the US, is the situation where there is a central government that is just not interested in addressing inequality and these sorts of distributional questions. And under these conditions, local government has to step up, and do what it can to benefit and respond to people in a particular community, and especially in disadvantaged communities. These sorts of economic strategies can be something that local government can do under these highly non-ideal circumstances. And it might be that the best economic development strategy for local government would be quite different if you thought that national government was also being serious about addressing inequality, for example if it were good at investing in people's skills in disadvantaged communities, or if it had an asset agenda, and was looking at how to address inequality in other ways. But if that's missing in the national picture, we're in non-ideal circumstances where certain responsibilities have to devolve to local governments where they're able to take action.

TH: I think that's right. If you look at the United States case, you have about $80 billion a year being spent at all levels of government for economic development for the express purpose of bundling up subsidies and tax breaks. So you have a situation where you give a big gift to a company to leave Milwaukee and come to Cleveland. Talk about zero-sum policies, right? So we get 200 jobs but Milwaukee loses 200, and then the company has no loyalty to the community of Cleveland. They're only there for the money and those perks and tax abatements, and all that runs out in six or seven years, and then they just get up and move to North Carolina. So to those who say, 'Won't this result in protectionism in each city?', I'd say that this is what we have already, right now. What we have now is every city competing with every other city, and we're using this vast amount of money to reinforce that system, rather than investing locally.

The City of Cleveland Department of Economic Development also does that 'smokestack chasing', as it's called. And the money is coming from the federal authorities and then the city uses it. To their credit in Cleveland, they took a percentage of that money and said we're going to invest in indigenous industries, from the ground up, in poor communities, and in worker co-ops. We think it's kind of risky because we've never done it before, but these are companies that are committed to staying in Cleveland. Indeed by their charters, are constrained from moving away. So this is an investment that won't run away.

So I think you're right. At a time when the larger governing authorities care nothing about this agenda, and really don't care about communities, this has to be an agenda that's pursued locally. In the United States, we're just throwing away the infrastructure of whole cities. At this time, I think you're right, where the new models and innovations can be developed is with municipal authorities. In fact, municipal authorities have no choice if they're going to stay in the game.

MO'N: One thing that's been announced today is the creation of the Labour Party's new Community Wealth Building Unit. This strikes me as a very interesting development. In that context, I have two related questions for you. What do you think are the main lessons from the Cleveland Model and from the work of The Democracy Collaborative that should feed into how that new Labour Party unit develops? And more broadly, what would your hope be for what that unit might achieve, and how it can change how Labour local authorities operate under the highly non-ideal circumstances of a Conservative government in Westminster?

TH: Let me bite off some of that question. I do agree that this new Labour Party initiative is a really important development. It could be, to use the overused phrase, quite game-changing.

In the United States, it's very good that there's been all this experimentation at the local level. But to institutionalise a national force that can drive a strategy, commit resources and build the vision around this, and offer technical assistance in how you do it, that's what I think is really game-changing. In the United States, we've been able to achieve a great deal in two cities where the municipal government has created their own Office of Community Wealth Building--Richmond, Virginia, and Rochester, New York.

So we have helped to catalyse these two municipal initiatives, and now we'll see how they develop. That's important. But I think at the national level within Labour, the potential is huge. One of the things that distinguishes the development of this field here in contrast to the United States is we don't have a political party with a socialist history, for which this is a natural fit.

The Democrats are sympathetic because it's a strategy to create jobs for poor people, but they don't have a history of public ownership, which is really an important aspect of our approach. So I think it's very important that this is happening with Labour committing to community wealth building.

My hope is that this unit will be far more than rhetorical, that it will really take on the creation of a big vision of community wealth building; that it's going to deal with a local economy that's non-extractive, and promote public ownership of energy and other kinds of resources, and the use of public money not for the corporate capitalist structure, but to invest in real communities, and to build a politics around that.

If done well, and I have no reason to think they won't do it well, this could be a really important development driving a new economic agenda both in terms of practice and model building, but also rhetorically, talking about a new economy. So I'm pretty excited. I think it's brilliant that this unit is located at the very highest levels. It's not just that there is a new programme that Labour is doing, but it's coming right from Jeremy Corbyn's office.

MO'N: I think there's huge credit due to Matthew Brown, for getting people on the left in Britain interested in these ideas. As he put it to me at one point, 'all you need is a few single-minded people who just won't be stopped'.

TH: He's certainly one of those.

MO'N: I'll just ask you one final question, which is about the US. Some of the communities that voted for Trump most strongly were those that economically have been left behind by industrial decline and that have certain shared features with some disinvested communities here in the North of England. Do you think there's a political strategy in which the economics of a community wealth building strategy can harness some of the disaffection of 'left behind' communities, and create a political transformation there?

TH: Yes, I do. Absolutely. What we need to do--and we're giving a lot of thought to this--is to build these systems in the heart of the Trump constituency, so that people are being brought into the economy in a whole new way through cooperative ownership and community wealth. We're at work creating what we call the Agenda for the 2020s. When we articulated that, it seemed so far away, and now of course, it's tomorrow. The idea is to help build a political agenda, because what's happened through Bernie Sanders and others is that literally thousands and thousands of people are running for political office--progressives, who never would have considered running for political office previously in the United States.

So really it's already started. And they're starting to win, at all levels, from Senate and Congress to city council, the board of education, and planning authorities. The issue is that they're very inspired, they've got Bernie's articulation that the system's broken, that we're getting screwed by the banks, that sort of analysis, with the role of the one per cent. But if they get into power, they don't have anything to implement. They don't have a clear political agenda. What do you do with local finance or capital? What does economic development look like?

So we want to help to articulate a political agenda that we can make available widely, that can connect to this new political energy after Bernie. So there's the work of political movement building that needs to happen. It can't just be a technical assistance program. We need to build a movement where there's demand, and politics, and people are going for power. The central issue is the nature of the economic system. So you've got to look at economics, and there needs to be a political movement around that.

If community wealth building is seen as just a technical economic development, then nothing much is going change. It's got to get to the question of power. That's what it's really ultimately about. It's almost like a window in to the much bigger systemic crisis. The gateway step of community wealth building can lead you to the bigger critique of what to do with the world. Answering questions such as: why is Preston in the shape it's in? It has very little to do with what people in Preston have done. It's connected to this bigger system.

That's not to say we can't make significant improvements, even within that existing system. But ultimately we're going have to take on that bigger monster that's dominating our lives.

MO'N: That's a perfect note on which to end! Thanks very much indeed.


(1.) See M. Brown and M. O'Neill, 'The Road to Socialism is the A59: on the Preston Model', Renewal, 24.2, 2016.

(2.) See The Democracy Collaborative, Next System Project website,

Ted Howard interviewed by Martin O'Neill
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Author:Howard, Ted; O'Neill, Martin
Article Type:Interview
Geographic Code:1USA
Date:Jun 22, 2018
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