Trickle down economics is dead, and community wealth is replacing it.

Over the past week, we've welcomed Ted Howard, founder of the Democracy Collaborative, to the UK to learn more about a model which is making policy makers across the political spectrum in the US sit up and take notice, and seeing what the lessons might be for communities the UK.

Communications & Digital Officer

Local Government Officer


The message of the past year is loud and clear: the old economic consensus is finished.

The old thinking of the past 40 years – that wealth accumulated by the richest in society would eventually ‘trickle down’ to the poorest, hasn’t materialised. And especially not in communities across the UK, US and elsewhere, where industries that were once the lifeblood of entire regions have disappeared, and the jobs with them.

Left to fend for themselves against the whims of national and international markets, it’s easy to see why so many chose to chance it with slogans like ‘take back control’ and ‘make America great again’ over a status quo that they felt had long ago forgotten about them.

But if ‘trickle down’ is dead, then a new idea – that of community wealth – might be the thing to replace it.

What is community wealth?

First pioneered in Cleveland, Ohio, and known as the ‘Cleveland Model’, the idea behind community wealth building is a simple one: that the means to bring jobs and prosperity back already exist within the community itself.

So-called ‘anchor institutions’, in the area are key. In Cleveland, Ted Howard and others worked with local universities and hospitals to look at how and where they used their spending power. They identified opportunities to boost the proportion of products and services these institutions buy in from local businesses.

And where gaps in the market existed, they founded a not-for-profit – Evergreen Co-operatives – to set up employee and customer-owned co-operatives to fill those gaps. From laundries to hydroponic food production and solar energy, these co-operatives startups act as engines of local economic growth.They create quality jobs, recycle money into the community (via salaries, the goods and services they themselves buy in from local businesses, as well as dividends paid out to customers and employees), and provide training and skills in areas education and employment opportunities are often hard to come by.

The anchor institutions, in turn, commit to doing business and sharing their expertise with these co-operative startups, giving them the stability and support they need to succeed.

And it’s catching on

The example of Evergreen Co-operatives in Ohio is inspiring a movement of community wealth building in cities across the US – and in the UK, Labour & Co-operative councillors are at the forefront of efforts to bring the model here.

Led by its co-operative council, over the last five years Preston has seen an extra £4 million invested in the city, and new co-operative businesses founded.

Not waiting for Whitehall

The failure of trickle down economics resonates with many in the Manchester City region. Large growth in Manchester centre doesn’t necessarily mean that communities such as Oldham and Bury benefit. However, the opportunities of devolution and the mayoral election mean that communities don’t have to wait for Whitehall anymore to rewrite the rules for the local economy. The vision and leadership from anchor institutions as well as the hard evidence from Cleveland and Preston, provides a compelling argument for change.

Manchester City Council has already made a start. Working with CLES (Centre for Local Economic Strategies) it has moved its local spend from 44% of its budget to 70%. Meanwhile, Manchester University’s Inclusive Growth Unit is looking at how growth can be measured beyond the economic figures, to include its role in reducing poverty and inequality.

The lessons from Cleveland, show that “a job alone is not enough”. Even in work, many people are only one incident away from slipping back into debt. That’s why the co-operative model is so valuable, as it enables individuals to build up wealth by having a stake in the company. As one employee from Evergreen Laundry, who has been in prison twice summarised, “I never thought a person like me, would be able to own an organisation like this”.  Poverty and inequality is being challenged, and individual lives changed.

Challenging how we use our capital and resources

In Westminster, the debate looked at how we use our capital and resources, such as finance and government contracts. With wealth concentrated in the hands of fewer individuals and companies, and its impact on democracy – what can be done about it?

The embedding of co-operatives and social enterprises as strong business proposals is key. Government and council procurement offer huge opportunities to shape the economy, but there is a tendency for the same big firms to smother the smaller firms, as institutions seek bigger contracts and frameworks.

Despite government targets to increase the number of contracts with SMEs (small and medium-sized businesses) to 25%, the Public Accounts Committee remain sceptical about the progress made. The devolution of spend and the constraints of EU procurement law lifted through Brexit, provide big opportunities to rewrite the rules of the system to better reflect public and community value in spending.

Changing the debate

Cleveland like many places in the UK, has seen an industrial decline as external interests withdraw.  Both Cleveland, US and Redcar, UK saw their last steel mill close in the last couple of years, with thousands of jobs lost. The new debate on localism comes as communities seek to take control over their future.

Evidence based conversations, such as those in Manchester and Westminster have the power to change the terms of the debate. Co-operative politicians and activists, from Oldham to Birmingham are already proving a different economy is possible, recognising that community wealth is about valuing people in our pursuit of local economic growth.