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Rebuilding local economies: a shift in priorities

Anna White
20 October 2010

The grassroots movement for economic localisation represents a positive and practical response to the challenges of food insecurity, climate change, peak oil and financial instability. Governments should support this alternative vision for sustainable, human-scale development, writes Anna White.

From the burgeoning popularity of farmers’ markets and co-operatives to the revitalisation of community banking, people are organising to reclaim the economy from large profit-driven corporations and ‘too big to fail’ financial institutions. The small-scale and diversity of these local initiatives masks the immense potential they hold for addressing fundamental flaws in the current model of economic development. Rather than treat the swing towards the local as a fad or misplaced radicalism, the policy community should work to support this alternative vision for sustainable, human-scale development.

Why localise?

The concept of discriminating in favour of local economies is by no means new. One of the most well known advocates of protecting the local is none other than John Maynard Keynes, as emphasised in his famous essay of 1933, On National Self-Sufficiency: “I sympathise with those who would minimise, rather than those who would maximise economic entanglements among nations. Ideas, knowledge, science, hospitality, travel – these are things that of their nature should be international. But let goods be homespun wherever it is reasonable and conveniently possible, and above all, let finance be primarily national.”

Of course, the world has changed in ways that Keynes could not have anticipated. For contemporary advocates of what is often referred to as ‘localisation’, the issues extend far beyond the protection of local jobs and industry. To dismiss supporters of small-scale, community-oriented economic development as protectionists – as many do – is to misconstrue both the motivation and the methods of those involved. The growing emphasis on greater self-reliance should instead be considered in light of a number of unresolved crises that are the unintended consequences of a globalised economic framework: food insecurity, climate change, peak oil and financial instability.

Hunger in the global food system

Global food production has increased significantly over recent decades, yet so too has the number of people suffering from chronic hunger. Recently revised figures reveal that victims of global hunger remain at an unacceptable high of 925 million (UN Food and Agriculture Organization, 2010). Lack of available food supply is not the fundamental problem, as current production levels are more than sufficient to meet global needs. The structural causes of food insecurity are rooted in an over-dependence on volatile international markets in basic food commodities, both in developing and developed countries.

Market volatility – largely a result of speculative activity – not only results in price hikes for the poorest households who spend up to 90 per cent of their income on food, but it can also push prices down for farmers whose livelihoods depend on export crops. The media and many NGOs have also paid much attention to increasing malnutrition in agricultural areas where cash crops, including biofuel crops, have replaced local food production.

The conclusions of the International Assessment of Agricultural Science and Technology for Development, undertaken by 400 scientists under the auspices of the UN and the World Bank, clearly state that the focus on export crops has left many small-scale producers (the majority of the rural poor) vulnerable to volatile international market conditions and international competition, often from subsidised producers in the North.

Prioritising local food

Rebuilding local food economies is an important step towards addressing the problems of volatility in global markets. Small-scale, diversified food production for local and regional consumption is essential for creating more stable livelihood opportunities for the rural poor in developing countries, and also offers the best hope for ensuring national and regional food security through increased self-reliance.

In industrialised countries, localising food production and increasing food self-sufficiency is equally important. The local food movement, most evident in the growing popularity of initiatives such as community gardens and local farmers’ markets, seeks to address both sustainability and fairness in the global food system. Concepts such as ‘food miles’ have made consumers conscious of the carbon emissions associated with long-distance trade in agricultural commodities, to the point where supermarket chains now actively seek to stock shelves with local produce.

The environmental costs of globalisation

Various reports by UN agencies over the past year suggest that the worldwide drive towards globalisation and urbanisation is taking an ever-greater toll on the earth’s ecosystems. In particular, the twin spectres of climate change and peak oil threaten the long-term viability of current international trade patterns.

Trade forms a growing share of our increasingly fossil fuel intensive global economy, and the transport it depends on is one of the fastest rising sources of greenhouse gas emissions. Not only are nations engaged in ecologically wasteful ‘boomerang trade’ (exporting and importing identical goods that could remain in domestic markets), but many industrialised countries now ‘outsource’ the true environmental impact of their consumption patterns by importing goods and food from other countries.

Under the Kyoto Protocol, greenhouse gas emissions are allocated to the countries where the gases are generated, not where the produce is consumed. A study undertaken by the Carnegie Institute for Science found that around one-third of EU nations’ CO2 emissions were embodied in goods and services imported from other countries, mainly in the developing world. Globalised production patterns thus allow countries with high levels of consumption to avoid responsibility for CO2 emissions and other ‘negative externalities’ yet to factor into the market price of goods.

Price rises associated with peak oil production also threaten the longer-term sustainability of current production and trade patterns. In many parts of the world, communities have become dependent upon globalised supply-chains fuelled by cheap energy to meet local needs. As readily available oil supplies dwindle – which the International Energy Agency has warned may be as early as 2012 – the extraction of more energy- and carbon-intensive fossil fuels (such as from the Canadian tar sands) will further exacerbate the environmental costs of globalised trade.

An alternative – trade subsidiarity

If governments seem sluggish in their response to these problems, large numbers of the public do not. The Transition Towns Network, one of the fastest growing social movements in the world, aims to reduce the ecological impact of economic activity by building resilient, diversified local economies. Through projects such as local currency schemes, community gardens and re-skilling workshops, people are self-organising to rejuvenate localised economic activity and reduce fossil fuel usage.

The aim of such initiatives is not communal autarky, but rather to realign the production and distribution of goods and services within ecological limits while still ensuring basic human needs are secured. Supporters of localisation recognise that economies of scale are essential for efficient production in some areas, such as in the manufacturing of electronic goods. But where there are major environmental and social benefits in producing on a smaller scale, local trade should be prioritised.

A global economy organised along these lines would naturally reflect the principle of trade subsidiarity. While political subsidiarity involves devolving decision-making to the lowest practical level, extending the concept of subsidiarity into the realm of production and consumption would encourage goods to be traded as locally as possible. The environmental benefits are twofold. Firstly, replacing large-scale, energy-intensive production and transport systems with localised small-scale, labour intensive systems would help countries to drastically reduce greenhouse gas emissions. Secondly, it would also reduce the ‘out of sight, out of mind’ effect that allows rich nations to avoid the environmental consequences of their over-extended consumption patterns.

Financial crisis: an opportunity for reform?

The 2008 financial crisis exposed deep flaws in the neoliberal approach to economic development that has dominated policy-making since the 1980s. Government intervention in the economy and the nationalisation of many financial institutions proved essential in preventing system-wide collapse, despite the dominant laissez-faire ideology. It is now clear that unregulated markets are not intrinsically stable, nor do they lead to greater prosperity for all. Policies to promote free trade and economic globalisation have concentrated wealth in the hands of a few, while communities everywhere have become more vulnerable to shocks in the global market and a ‘race to the bottom’ in labour and environmental standards.

With little consensus on what should replace the status quo in economic policy-making, the G20 has directed all its efforts to saving the free market global economy – leading to an even greater reliance on export-led growth, reduced barriers to trade and increased capital flows between states. Frustrated by a perceived lack of sufficient action from governments, many people are moving to reclaim control over the economy themselves through alternative business and banking practices. An increasing number of community banks and credit unions are seeking to redirect finance towards long-term investments in local business and social enterprise. The boom in micro-credit is also bolstering social investment in the poorer regions of developing countries, enabling people to start up localised enterprises in areas often neglected by traditional finance. And alternatives to the corporate business model, such as co-operatives, social enterprises and family-owned businesses, are receiving renewed support to encourage local ownership and production.

With many long-held economic maxims under serious review, a great opportunity exists to build a fairer and more sustainable global economic infrastructure. Instead of rolling back the regulatory powers of the state in the hope that the globalised free market will act as the lever of economic growth and widespread affluence, members of the Commonwealth should work together to foster resilience and diversity at the local level.

A new policy framework

Although strengthening local economies depends upon bottom-up development and widespread participation at the local level, the wider policy environment is equally as important. Current grassroots efforts to ‘go local’ are hampered by national and international policies geared towards encouraging comparative advantage in a liberalised global economy. To allow this marginalised movement to reach the mainstream clearly requires a wholesale shift in the priorities of economic policy-making.

As the specific conditions for encouraging locally-oriented business vary from country to country, the recommendations listed here are necessarily broad. These are but the first steps in creating an alternative economic framework in which sustainable, resilient local economies can flourish:

  • Internalise environmental costs of production and transport to provide the right kinds of incentives for more efficient and environmentally-friendly local forms of production and consumption in a range of industries. This can be achieved through ecological tax reform and/or pricing mechanisms for the use of natural resources and ecosystem services, as well as the removal of public subsidies for fossil-fuel-intensive energy, transport and agriculture.
  • Renegotiate international trade and finance rules so that their end goal is the regeneration of diversified local economies. Trade agreements should be guided by the principles of subsidiarity, sustainability and sufficiency, thereby reducing the negative environmental and social ‘externalities’ associated with globalisation.
  • Facilitate the introduction of local currencies and the set up of local banking and micro-finance institutions to encourage long-term investment at a local level. This can help provide the necessary financial assistance that small businesses require to set up and operate.
  • Introduce and enforce rigorous anti-trust legislation to break up concentrations of corporate power and encourage local competition among small businesses.
  • Develop alternative indicators of progress, beyond GDP, that incorporate measures of well-being and sustainability.

A new path of development

For many people, the motivation to rebuild local economies goes beyond practical concerns about economic stability and sustainability. It is rooted in a deep dissatisfaction with the lifestyle promoted by an economic system that globalises production and consumption, placing profit and efficiency above local participation and community. By actively discriminating in favour of diverse and resilient local economies, the governments of the Commonwealth can set their countries on a new path of development – one that fosters human flourishing and safeguards the planet for future generations.