Building a new local economy in Wales

Chris Johnes and Neil Mclnroy examine new opportunities to strengthen local economies

For many years, in Wales, we have sought to address weak local economies in many areas. This has become a more acute challenge over the last decade as deep recession followed by austerity has reduced the ability of the public sector to support the local economy, especially in areas where private sector activity is lower. Whilst mass unemployment has been avoided, many communities struggle with weak economies and pressured public services; rising levels of self-employment simply mask a decline in living standards and the growth of in work poverty.

These trends have produced both an intellectual and a practical reaction.  Across Wales, the wider UK and elsewhere, new ideas and practice is now emerging, which promise new approaches in economic and place development with a much clearer focus on local benefits.

The kernels of this activity are centred on approaches that seek to retain both more wealth and more control within localities. This includes building strong social and business networks, more local procurement, maximising the ‘foundational’ everyday economy of essential local sectors, supporting community anchor organisations and social enterprises and trying to ensure that City Regions bring shared economic benefit. In the midst of enduring post-industrial blight and great social pain, it is now time to bring these approaches front and centre of national and policy, ensuring that our economies work for everyone.

We should be encouraged, across Wales there is no shortage of innovation from businesses, community organisation and social enterprises. Some public sector organisations are also responding with signs of more flexible policy approaches and thinking about how they ensure that resources remain local.  The task now is to ensure this flourishing of innovation is matched with a sympathetic policy regime and support for many more communities and citizens who wish to learn from and build on this innovation.

In doing this we must marry economic and social development. They are interdependent. Social development is not solely an outcome of economic growth, but equally an input.  In skills development, responsible stewardship of our environment, care in all its forms, provision of housing, the economic and social elements are maximized when the two are considered together.  This is increasingly acknowledged, but we need to go deeper and relax our faith in the ability of growth and wealth alone to bring the promised social dividends; instead we must create economic strategies that balance financial and social return.

And the impacts of this will be most obviously seen in our communities, where the economic and social aspects of life are as one and intertwined.  This is where much of the innovation we seek can develop and grow.

This is not a peripheral or merely ‘local’ concern, but rather goes to the heart of wider national economic and social trends.  In particular how technological shifts are prompting a shift in wealth. The acceleration of automation is speeding up a longstanding shift from wealth through employment to wealth through investment return. Automation increasingly means that lower/medium skilled production jobs will disappear. Therefore, we either condemn more people to low-paid and insecure work or we reorganize the economy. Workplace protection must be strengthened and modernized and financial return on investment needs to be broadened and deepened, not narrowly held by a few. The task is clear: we now must, advance ownership forms which seek to capture and broaden out wealth gains and put people and communities more in the local economic driving seat.

We also need to recognize and build upon local strengths. Central Government economic policy, be it made in Cardiff or London, is often characterized by big promises around the transformative effects of hard infrastructure, a large singular inward investment or city agglomeration economics, which will provide the path to a better economy and social progress. However, this decades long default setting has had patchy success at best.  Lessons from across the world, tell us that there is no silver bullet, the answer is much more complex, more bespoke and importantly more local. As such, we must build more from what people in Wales are already doing and on the assets we have, and less from we can attract or construct. In this, support for social and creative industries, environmentally based enterprise, local ingénue and local enterprise, is a key and often under-respected component and one that is far more likely to root and retain wealth within localities.

And we need to recognize the importance of the economy of care. We must counteract the economic development disregard given to the caring professions (social work, nursing, elderly care etc.). Human touch, care, and empathy cannot be automated, and as such most of these jobs will endure. A shift to investment in these sectors (which are too often seen as a cost), is essential part of any economic policy. Indeed, in some locations they will be more important as employers and as purchasers than more glamorous high tech sectors. The caring sectors may add less to economic growth than some others but they remain foundational aspects of all economies, and vital in advancing human decency and a good Welsh society.

We are now at a time of great change in thinking about economies and about the importance of place in Wales. Attempts to mould the Treasury inspired City Region economic approach to deliver socially are welcome but of uncertain provenance. The Valleys Task Force is seeking new solutions to old challenges and the end of Communities First suggests new faith in initiatives led by communities themselves.

What we see (and we shall illustrate far more fully in a subsequent blog) are many across the public, social and commercial sectors wrestling with, and delivering on the challenges that Government policy is now examining. There is now the opportunity for Government to provide the framework and support for many more actions that strengthen local economies. This new wave of ideas and action, is no longer an add on or on the periphery of economic and social policy. It is fast becoming the centre.

Wales needs to celebrate what is already happening in places, towns and cities across the country and national policy needs to catch up and create the context for this to be amplified and accelerated.


All articles published on Click on Wales are subject to IWA’s disclaimer.

Chris Johnes is Chief Executive at Building Communities Trust (BCT). Neil McInroy is Chief Executive at the Centre for Local Economic Strategies (CLES).

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