Complexity or resilience?

In the Times, Ed Conway (right), economics editor of Sky News, describes problems arising from the complexity of ‘the hallmark of 21st-century life’ and the International Alliance for Localization records examples of new modes of development and progress.

Conway writes about the vast supply chains, financial instruments and legal structures ‘sitting beneath every industry’:

  • Where once a company made its products in one country, these days most sophisticated goods are the product of many hundreds of contractors from around the world, eventually assembled into one unit and quickly shipped to your door.
  • Where once a bank manager would know to whom he lent money, these days debts can be packaged and repackaged so many times that the link between borrower and lender is effectively lost.
  • Financial globalisation — the ability to move money seamlessly from country to country leaves countries even more vulnerable to banking crises.
  • And in much the same way as companies outsource non-core production and services, the public sector delegates responsibilities to private operators.
  • By replacing tightly knit relationships with impersonal complex structures we lost something — consider the 2008 financial crisis,

The complexity of the regulatory system played a part in the Grenfell Tower disaster tragedy. Not only were regulations extensive yet oddly vague — allowing builders to use various loopholes — they were not even checked by government officials. These days contractors in England can instead hire “approved inspectors”, private outfits which provide a bit of advice and tick the appropriate boxes.

Globalisation, once a means of boosting everyone’s income, has instead evolved into an excellent vehicle to help the rich get richer.

The International Alliance for Localization sees that the building of more resilient economies will require a rethinking of the financial system, and its Planet Local series has been turning the spotlight on some inspiring examples of ethical banking:

* In Maine, USA, a local resident with money to invest  is providing nearby small farmers with loans whose interest is paid exclusively in the form of farm products.

* Brazil’s Banco Palmas, governed and managed by residents of the impoverished Palmeiras neighborhood in the city of Fortaleza, has issued a local currency, dramatically shifted spending patterns to keep money circulating locally, and extended basic financial services to people shut out of the mainstream banking system.

* In Croatia, the democratically-owned Ebanka functions as a non-profit bank, in stark contrast to most financial institutions worldwide. Their loans are given without interest, and every member has an equal voice when it comes to voting on big decisions, regardless of the value of their deposit.?

Visit IAL’s growing library of localization initiatives

 

LWM is a member of IAL, a cross-cultural network of thinkers, activists and NGOs from 58 different countries.

 

 

 

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The FT and IFIs recognise the passing of globalisation

In a Political Concern blog, Mario Draghi, president of the European Central Bank, Christine Lagarde, managing director of the International Monetary Fund, and Donald Tusk, president of the European Council, have all decried a system they claimed had neglected the security of its weakest members.

izabella-kaminskaEarlier this month Izabella Kaminska referred to UBS’ ‘big note’ reviewing the passing of globalisation. She comments that labour costs go up in emerging markets — and as western consumers become more conscious of what constitutes fair and unfair trade — we should not really be surprised that global supply chains are shrinking, and that:

“Shipping stuff half way across the world simply doesn’t make half as much sense if the pay-off from cheap labour or favourable currency effects doesn’t compensate for the shipping costs (or increasingly, the carbon footprint either)”. The downturn in global trade was detailed on this site in July

china trade graphic

Longer and more complicated supply chains require a far more complex and extended route to market — including far more expenditure on transport and energy — than they would require if they were sourced more locally.

UBS notes that global value chains have become shorter as some countries have on-shored (or reshored) production because bringing production closer to home often serves end customers better and there are now higher unit labour costs in Asia. (See the work of Professor David Bailey and references on the WM Producers website).

guy-standingAnd today the FT reviews a book by Guy Standing, a professor at the University of London’s School of Oriental and African Studies: The Corruption of Capitalism.

It notes that many of the author’s ideas for fixing the system — such as a universal basic income, where all citizens receive regular payments from the state whether or not they work — are receiving more attention from the mainstream.

 

Political Concern asks:Is localisation also part of the answer?”

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Its recommendation: “Search the Localise West Midlands site – and especially see the work on Mainstreaming Community Economic Development”.

 

 

 

 

 

Time to change: Professor Lang’s challenge: embrace local sourcing

tim langSusan Press in the Co-operative News reports a challenge issued by Professor Tim Lang, Head of City University London’s Centre for Food Policy, to the Co-operative Group. It is time to radically change the way food is delivered and distributed to the Group’s 4,800 retail outlets:

“At a time of growing interest in locally sourced food, he thinks there should be far more support for producers supplying direct to local stores. He says: “I think the co-op has lost its way a bit. Back in the 19th century, the first co-operators led the movement against the adulteration of our food and sourced local food which everyone could afford.

Unfortunately, the Co-operative Group has gone down the road of emulating the supply chain model of its major competitors with regional distribution centres and centralised supplies . . .

“But our food supply is being more and more standardised by very big and powerful companies. There are more local artisan and special interest foods, so we have come a long way, but small producers are held back by lack of access to land, ownership of which is dominated by large landowners.”

One of Professor Lang’s current concerns is the growing concern around food security – the availability of food and access to it

He points out that worldwide, figures show around two billion people are going hungry and for the first time in decades the number of food banks in the UK has tripled in the last 12 months.

Lang says: “For the first time since 1945 we are living at a time of rapidly rising inequality, with around five million people living in poverty according to the recent report from the Social Mobility and Child Poverty Commission”. He looked at the history of the co-operative movement:

“In 1994, the Group set up the Responsible Retailing Code, building fair and sustainable relationships with suppliers across its whole supply chain across the world, also leading the way on Fairtrade. It was pioneering stuff, but we need to be building upon that knowledge and working for more sustainable food thinking concerned with the future of biodiversity and our eco-systems . . .

“Like the other major retailers, the Co-operative Group goes for cheap meat reared on cereals. Around 40 to 50 per cent of our cereals are fed to animals. We need more grass-fed meat and dairy and we all need to eat less meat and double consumption of fruit and vegetables because we are storing up huge problems for the future  . . .

“We don’t need supermarkets offering 35,000 lines or people working hard to earn enough money to buy a car so they can drive to the local hypermarket. We need to look at what things will be like in 2050; the effects of climate change and the billions more people there will be on the planet. We need to establish a good food culture which is also good for the environment.

“Stores have to have better access to local food with a shorter supply chain and we have got to re-design the whole food system because frankly it is environmentally crazy.”

Read the whole article here: http://www.thenews.coop/article/time-change-food-professor-issues-challenge-embrace-local-sourcing

 

Professor Lang was the first to coin the term ‘food miles’ – in the 1990s – to describe the distance groceries have to travel to reach us. He was invited to set up the London Food Commission in the 1980s with the Greater London Council, which did some of the earliest work on the effect of food poverty. He pointed out the damage done to school and hospital meal services by government policy, making a major contribution to the Food Safety Act (1990) and the creation of the Food Standards Agency (2000). He has been a consultant to the World Health Organisation, a special advisor to four House of Commons select committee inquiries on food standards globalisation and obesity and was on the Council of Food Policy Advisors to DEFRA.

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‘Local Liquidity: From Ineffective Demand to Community Currencies’

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molly scott cato 3Dr Molly Scott Cato opens her Green House paper, which may be downloaded here, by asking how our ongoing financial and economic crisis is to be understood and resolved.

The mainstream view is that we need economic growth – and austerity – because of the vast government deficit and stagnant economy.

Others say that we must invest and borrow more now in order to resume growth. Both sides are assuming ‘growthism’ as an unquestioned dogma.

She continues:

“The aim of the Green House Post-Growth project is to challenge the common-sense that assumes that it is ‘bad news’ when the economy doesn’t grow and to analyse what it is about the structure of our economic system that means growth must always be prioritised. We need to set out an attractive, attainable vision of what one country would look like, once we deliberately gave up growth-mania – and of how to get there. And we need to find ways of communicating this to people that make sense, and that motivate change”.

Attempts to restart economic growth have been unsuccessful; local economies are suffering from the large-scale withdrawal of liquidity that the public spending cuts represent. Local currencies across the world offer a different type of liquidity, “but one that has suffered from lack of credibility and from an absence of political support”.

Scott Cato recommends local authorities to generate truly ‘effective demand’ in their communities

This can be done by introducing local currencies into their fiscal administration on a staged basis, beginning with local services, as partial payment of local tax, and eventually for the payment of staff – note the voluntary example of the mayor of Bristol.

Her verdict on ‘queasing’:

“The government’s creation of money through its quantitative easing programme has only created ‘ineffective demand’ because it has been sucked into banking debts; by contrast money spent into the local economy as a local currency could help to revive local economies and build resilient communities and thus constitute genuinely effective demand”.

Community currencies exist in Brazil, USA, Argentina, Japan, Switzerland, Germany, France, Austria, the Netherlands and the UK

Across the world, community currencies exist in countries with widely contrasting economies and levels of wealth ‘as conventionally measured’. Citizens are taking control of the medium of exchange and issuing their own money in Brazil, USA, Argentina, Japan, Switzerland, Germany, France, the Netherlands and the UK. Scott Cato notes:

“Local currencies have provided a way for people to work and make a contribution to their local community even when conventional jobs paid in the national currency are not available. In this way many social needs have been met that would otherwise have been left unresolved”.

She looks at community currencies used in the past and those currently used in other countries. Two examples are summarised here:

“The Chiemgauer was launched in the Salzburg town of Chiemgau in 2003 and is accepted by around 150 shops and service providers including the optician and pizzeria. Chiemgauers to the value of €60,000 were spent in the first year of the scheme, which was started by a local economics teacher. To add credibility the currency is effectively backed one-for-one by euros, since the money is bought directly in exchange for the European currency, which is deposited in a local bank before Chiemgauers are issued. They can be exchanged back but for a 5% fee”.

The Chimegauer has an initial validity of three months, after which its value can only be extended by purchasing a stamp costing 2% of its value. Since it earns no interest there is no incentive to hoard or invest, meaning that the currency will instead be spent, increasing economic activity.

“The Chiemgauer is now very widely used. It has 600 shops participating in the scheme, 1800 consumer members and 200 charitable associations who receive donations every time the local currency is purchased. Around 430,000 Chiemgauers are in circulation, generating a transaction volume value of more than €4m”.

She notes that Japanese local currencies are also time limited:

“(They) tend to be designed as coupons which are received in return for voluntary work and can then be spent in local shops. They have a long history and are widespread. The first Japanese currencies were organised as ‘voluntary labour banks’ similar to time dollars. In 2001 these were joined by ‘eco-money’ designed by former MITI employee Toshiharu Kato.

A few points from Dr Scott Cato’s conclusion

“From a green perspective, the building of a sustainable society requires a transition towards a system of self-reliant local economies, where the majority of our needs are met from genuinely local production.

“Green economists see the lengthy supply chains of the global economy as wasteful of energy, as well as leaving us vulnerable in the face of rising fuel prices and more unpredictable weather resulting from climate change.

“Rather than increasing growth for the sake of it, local currencies can shift economic activity out of the globalised economy and into the local economies on which we will all come to rely.

“In a globalised economy local authorities often feel powerless to act to support the economies which support their citizenry, but they are not. Local authorities across the world have the power to support local currencies and enable them to underpin struggling local economies of both production and distribution”.

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A resource centre of papers on complementary currencies from around the world is available here: http://complementarycurrency.org/materials.php

 

Birmingham’s wholesale markets – a partnership of inclusive local enterprise

It is vital to Birmingham’s independent food supply chains that Birmingham wholesale markets remain at their central site, neighbouring the retail markets, and being central for their diversity of customers and employees.

Despite a much-publicised Council recommendation to stop investigating solutions for the markets remaining on their current site, there is still a hope of this happening – an opportunity those of us who really care about widespread economic wellbeing in Birmingham need to seize with all hands.

There is an option to redevelop the current site keeping the wholesale markets, with new and exciting food-focused uses around them. This is the option Birmingham needs and that any self-respecting local enterprise body for the city would recommend.  On Monday, Birmingham’s Cabinet will decide whether to continue investigating this option. All it commits them to is keeping the door open for discussion.

Here at Localise West Midlands, as part of our Mainstreaming CED research, we studied the Birmingham Wholesale markets as good practice in community-scale economic activity. Below is what we learned about the impacts of the markets for inclusive economic success and enterprise.

To some, this will read as irrelevant to the big boys’ game of real economic development. They are wrong. The Mainstreaming CED findings are clear that economies built on local ownership and control and on smaller businesses are more successful in traditional economic terms as well as better in for all those woolly, irrelevant social concepts like quality of life. Far too much conventional economic analysis fails to recognise the collective benefit of local enterprise.

The wholesale markets and an inclusive economy

Birmingham Wholesale Markets are the largest integrated markets in the UK, comprising fruit and vegetable, fish, meat and poultry, dairy and flower sections. They are sited in central Birmingham, next to the city’s retail markets and have an aggregate turnover of £275 million, with 73 trading operations (all but two of which are locally owned) and employing 1,100 people. It is estimated by BWFPA that 15,000 jobs in the region are dependent on the markets.

ourbirmingham.orgSupply and Demand Chains

The markets also occupy a very significant place in Birmingham’s food supply chains: 95% of independent food businesses in the city – close to 5,000 independent food businesses – do some business there: an extraordinary market share.  The customer base also goes far beyond Birmingham into surrounding counties and even into mid-Wales.  The wholesale markets serve some ‘top end’ establishments such as Purnell’s as well as the affordable end, and also limited supermarket trade.

Whilst (as you’d expect) BWFPA has no official local sourcing policy, some members serve Bretts, the company that serves the city schools’ fruit and vegetable contract, for which the council has local sourcing and CO2 policies.  Figures are not available from BWFPA for the markets’ local sourcing but much of the horticultural produce is sourced from the region, including the Vale of Evesham and Staffordshire; but also from Europe and further afield.  Meat is mostly locally sourced, although also from Wales and Scotland too depending on seasonal availability and market value.  Again this points to a significant market role for produce that does not go through the multiples’ supply chains.

Social and Economic Inclusion

In addition to strengthening Birmingham’s local food supply chains, the wholesale markets also contribute to social and economic inclusion. This is partly in the sense that through the neighbouring retail markets they provide cheap high quality foods for the local community. Overheads and thus prices are low at the Bull Ring, making it a major contributor to healthy food access and social inclusion in the city centre. The markets also contribute in terms of  economic and social/ethnic diversity is very wide in the markets’ customer base, including always the latest wave of immigrants. Currently for example the customer base at George Perry is 80% Asian. Immigrants using the markets include Iraqis and Afghanis who will use the markets for small-scale street trading such as buying a box of apples and selling them on the street. A vast number of the city’s culturally specialist food shops source their produce at the wholesale markets, some of these communities then mix and socialise at the markets alongside the  long hours they work. So a social cohesion role emerges as well as a practical food distribution role that it is hard to imagine functioning if the Wholesale Markets weren’t there.

friendsofbullringmarets.wordpress.com

Employment, skills and recruitment

The Wholesale Markets also contribute heavily to employment, providing a major local source of recruitment especially from areas of high unemployment, resulting in a constant churn of new people.  They offer an effective opportunity for people who haven’t done well at school or those from “less socially acceptable” backgrounds: in comparison with many training programmes they provide ‘real’ manual work with a degree of security, flexibility and mutual respect; 99% of these positions are salaried and there tends to be mutual flexibility over hours depending on company and employee needs.  “It’s a rough and ready environment with politically incorrect banter but people just get on with it and each other, and there’s a sense of honour amongst entrepreneurs.”

Business: innovation, resilience, community

The Markets also offer a key source of innovation and resilience within the community. History has shown that the market is always capable of evolving and adapting, for example, innovation in IT to facilitate trade with international partners. The BWFPA committee is highly representative of small businesses, feeding their opinions into the council. Unsurprisingly, the wider community has been very supportive of the markets remaining where they are during BWFPA’s campaign, with strong support for the Bull Ring Markets and shops in addition to the signing of a petition of well over 20,000 signatures in support of the markets remaining on their current site. This is the largest petition ever delivered to Birmingham’s electoral officers.

The support of Birmingham City Council is essential if the markets are to continue supporting the local community. The council needs to recognise the fact that composite markets work well because they function as a ‘one stop shop’ – businesses will use them for all their produce needs and so are likely to buy a higher proportion from these local supply chains.  Community leaders also value the integrated markets, saying a move would split up whole communities. A central site is also crucial to this.

Moving the markets out of the city would change how the markets’ finances work, as rents and service charges would rise and require capital outlay. Some of their current efficiency and little need for borrowing would be lost.

Attempt to relocate or move the markets would be disastrous to the local community especially in terms of social and economic inclusion and local food supply chains. The Council might propose mitigation measures such as providing collective goods transport from the out-of-centre site for the retail markets and other customers, but realistically, how long would revenue funding for this last and how practical would it be? The proposal by BWFPA for a smaller and more streamlined wholesale function within a mixed use development and still bordering the vital retail markets would maintain, and enhance, the ability of the wholesale markets to benefit the local community and strengthen its local economy. This would support medium and long term economic success and yet still bring short-term financial benefits for a cash-strapped local authority.

The proposal for keeping the Wholesale Markets where they belong, in the city centre at the heart of a food-related new development, really is a win-win situation and if Birmingham City Council failed to take advantage of this, the economic and social consequences would be severe.

Jamie Stone and Karen Leach

LWM and others in the region want to know more about locally based SMEs

 

lwm logoLocalise West Midlands argues that small and medium locally based businesses, including those who may be part of a larger national franchise, have a greater ‘local multiplier effect’ on local communities, increasing the community’s prosperity directly, as well as creating comparatively high numbers of jobs.

LWM finds that SMEs:

  • are more likely to feel a sense of allegiance to that place and community;
  • have an interest in supporting the area and
  • may be less likely to disinvest in the midst of economic turbulence than ‘footloose’ companies

Overall, LWM finds that while individual small businesses come and go there is a stability to a strong small-business ecosystem which provides resilience against the massive shocks of inward investor loss.

It is difficult to find out what is made in the region

This complaint, made by an LWM researcher many years ago, was reinforced in June, when a member of Localise West Midlands met three local manufacturers and was interested to hear Peter Davies (Professional Polishing, Smethwick) say that – although the usual downbeat attitude to manufacturing persists – when he attends business gatherings the attitude is buoyant, with news of orders coming in.

It was suggested that an aggregator site, like our very useful Brummie, be set up to cover positive news from those West Midlands producers who tend to appear in the mainstream press only if they close down. However, on consulting aggregator supremo Mark Blackstock, and then the editor of the Birmingham Press, it was pointed out that these firms usually have no section on their websites for such news, so a robotic operation would not be possible.

A manually operated site was set up and – because of this information shortfall – hours of online research are needed before piecing together cheering news which is usually buried in the specialist press.

PPS logoAn honourable exception is the Professional Polishing Services company, now masterminded by Aston’s Kirsty Chinnock Davies, named as an IoD West Midlands Director of the Year, who never hides her firm’s light under a bushel, recording and sending out news of awards and machinery acquired.

The latest instance of PPS outreach is her invitation to share a video, issued to mark the company’s 30th anniversary: http://youtu.be/dYgJf_lJgAY.

PPS machinery 30 anniversary video

In 2003, Localise West Midlands, in partnership with Advantage West Midlands and other organisations, set up a conference on public procurement in the West Midlands Region. Since this conference, which focussed solely on regional food, localising public procurement in the West Midlands has developed significantly.

LWM and other organisations seeking stronger regional economies would welcome information about both food and goods produced in the region, to promote local economy ‘good news’ stories and to facilitate a move to more localised supply chains, bringing economic benefits to the West Midlands.