With politically motivated disruptions to the globalised trading system increasing the risk of another global crash; Localise West Midlands continues to advocate for a radical decentralisation of capital and power to local economies, to help build a more economically resilient, socially inclusive, redistributive and prosperous West Midlands.
With this in mind, it seems timely to revisit some of the evidence available which shows the benefits of more localised approaches to economic development. In 2013 Localise West Midlands published a literature review into existing evidence around the social benefits of more localised economies. We were surprised to find how little research had been done into localised economies before, so the review was significant and innovative in bringing this evidence together.
The review identified strong evidence that local economies with higher levels of small and medium-sized enterprises (SMEs) and local ownership performed better in terms of employment growth (especially in disadvantaged and peripheral areas), social and economic inclusion, income redistribution, health, civic engagement, wellbeing, local distinctiveness, and cultural diversity. They also benefited more from the local multiplier effect, where greater economic returns are generated by spending money at locally-owned independent businesses, instead of corporate chains where all profit leaves an area.
Some of the key findings were
- The public cost per job is 80% higher for Foreign Direct Investment than for indigenous businesses
- 92% of movements from unemployment or non-participation in the private sector are down to SMEs
- 2/3rds of the world economy is controlled by 500 companies accounting for only 1% of employment
- In a study of 3,000 US counties, those with a larger density of small, locally owned businesses had greater per capita income growth between 2000 & 2007
The research found that Localised economies deliver better on job creation than more centralised approaches do; this was particularly true in disadvantaged and peripheral areas. Localised economies also deliver better on resilience, stability and economic returns to an area; With small businesses significantly more likely to employ disadvantaged individuals and those vulnerable to unemployment than large and corporate businesses.
One interesting finding was that centralised and remotely owned economic development does deliver better pay and formal conditions than localised economic development. But! more localised economies offer a better quality of life, improved job satisfaction and more security for the workforce), with higher rates of civic participation and local economic power.
Read the full literature review on our website for more information and a list of valuable sources.