Tag Archives community economy

Community economies based on collective action and reciprocity have the potential to help us move toward a postcapitalist economics. However, communities tend to be romanticised and their politics sidelined. (Almost) forgotten economists have some interesting things to say about community economies and how they can be strengthened to contribute to systemic change, writes Irene van Staveren.

My training as an economist did not prepare me sufficiently to tackle the four ‘wicked problems of today – climate change, rising inequality, pandemics, and increasing financial volatility – through my work. The reason for this is that I was taught to take an individualist perspective, which holds that markets generate added value for society and improve well-being, whereas the state merely redistributes this created value. According to this logic, markets are by definition the most efficient mechanism for allocating value, even when this reinforces inequalities. When having to choose between market and state, the market always wins – or so mainstream economists claim. The exception is when markets fail, but then the state may be captured by private interests and hence may not be able to repair market failures. I’ve struggled with this concept ever since coming to the realisation that it simply isn’t working in this day and age.

There is a way out of the binary trap that forces us to choose either government-led or market-based ‘solutions’ that to date have been insufficient. We can look completely beyond either the market or the state to find innovative and hopefully enduring policy options that could help address the four wicked problems. Of course, a global tax floor for multinational companies is very welcome, as is a demand for a temporary waiver of patent rights on COVID-19 vaccines. But systemic change in the economies of both the Global North and Global South may come from an unexpected corner: the community economy.

A number of heterodox economists have mentioned community economies as alternative to the state-market binary either explicitly or implicitly in their work. This triggered my interest, so in a recent book I decided to look at fundamentally different ideas about the economy in which the community economy plays an explicit or implicit role. Interestingly, they do not only have a positive role, as I’ll explain below.

The bad/sad news is that romantics who hope that communities will save the world will be disappointed. Communities are made up of people – the same ones who are also consumers, investors, producers, and workers. Feminist economist Barbara Bergmann pointed at gender discrimination in communities, which affects the attitudes of employers, colleagues, and, through socialisation, even sometimes of women themselves. Indeed, gender norms may constrain women worldwide in their agency and wellbeing, as many feminist development economists have shown.

Thorstein Veblen, the founding father of institutional economics, pointed at another negative effect of communities, namely their tendency for emulation: we look up to the rich, copy their lifestyles, and thereby increase our ecological footprint – we emulate them. And status seeking makes it difficult to shift to a less materialistic lifestyle or even simply to give up the basic comfort of using plastic bags and bottles, for example.

Fortunately, there are also economists who believe in the transformative power of the community economy. Because it can be where collective action for the common good originates, it can provide the social norms for cooperation even if the benefits are not individually, but jointly obtained or are reserved for future generations.

Adam Smith, who is often referred to as the promotor of markets with his metaphor of the ‘invisible hand’, actually used this famous metaphor only once in his foundational economic book The Wealth of Nations. Instead, Smith wrote a whole book titled The Theory of Moral Sentiments twenty years earlier in which he theorised that the community economy was necessary to help markets flourish. Not the other way around, thus.

Let me mention one more almost forgotten economist here: Gunnar Myrdal. This Swedish economist who won a Nobel Prize did an extensive study on relentless racism in the US. In his explanation, he came up with the concept of cumulative causation. He deliberately proposed this as an alternative to the concept of a market equilibrium. In a market, supply and demand are supposed to be independent. But, Myrdal argued, markets are influenced by social norms, attitudes, beliefs, and behavioral patterns.

Why is this important? Just like Veblen before him, he recognised the power of institutions in economic behaviour. But he added a dynamic model to this, showing that one form of discrimination, for example racial segregation in neighbourhoods, triggers another form, such as prejudice among white populations about unemployment and poverty in those neighbourhoods. This in turn feeds other forms of discrimination, such as lower-quality schooling for black children, which subsequently feeds into lower labour market opportunities.

So the important insight from Myrdal was that discrimination is not a linear process that can easily be ended with some legal changes. Instead, he argued, when discrimination is part and parcel of community life, it inevitably affects markets and is self-reinforcing.

The good news is that social inclusion and empowerment follow the same logic of cumulative causation, for example of women in the Global South. For example, with more girls in school and the labour market, African economies experience more growth and human development while at the same time individual girls and women obtain more opportunities, bargining power in the household, and more influence on their fertility.

Challenging unequal North-South relations

I think that these ideas are still relevant today, but now on a global scale. They help us to understand how social norms, attitudes, and beliefs in the Global North affect the Global South through structural inequalities in markets: global value chains, financial markets, labour markets, and even land markets. Hence, global markets tend to constrain the opportunities of people in the Global South to choose their own development paths.

Countries in the Global South are then likely to rely less on global markets and more on the strength of their own communities to help markets flourish. This is an inherently negative development, but it can also have positive dimensions when it comes to a possible economic transformation. Here are three of countless examples of how community economies in the Global South can provide the seeds for postcapitalist economies to develop their own strength in a way that makes them independent from the unequal market relationships with the Global North.

A first example is the increasing popularity of worker cooperatives. We find them in all sectors – from agriculture to manufacturing, and from construction to energy. The strength of these is that the market in which capital hires labour is dissolved. In worker coops, labour owns capital and controls it in terms of investment out of their own pockets, bank loans, and retained profits.

A second example is the decades-old practice of savings and loan associations such as the ROSCAs (Rotating Savings and Credit Associations) in Africa. Here, the market is dissolved by excluding banks and financial market transactions. Communities themselves bring savings and credit together by using rotating schemes or lotteries with all members having an equal position as both saver and lender. The stokvel is a classic example.

A third and last example is community-led energy initiatives. Across the Global South, rural communities which are not yet connected to the national electricity network, or who experience many power interruptions, build off-grid solar power networks. These provide the community with power for light, water pumps, or other basic needs. Again, the market is dissolved, in this case through bypassing electricity firms and national supply and demand of electricity on markets.

Community economies can be key – but don’t romanticise them

The urgent wicked problems that the world faces cannot be addressed by the market, while the state is often not capable of addressing them effectively. The community economy is a likely candidate for systemic economic change. But it should not be romanticised. We need a new balance of power, influence, and innovation between the market, the state and the community economy, with the last one in the lead. How this may be done can be learned from some key insights by (almost) forgotten economists.

Opinions expressed in Bliss posts reflect solely the views of the author of the post in question.