Nine Tools of Economic Renewal

The preceding four principles are the foundation of a smart community’s development efforts–they offer a framework for thinking about how to approach development sustainably. But case studies of successful community development efforts compiled by Rocky Mountain Institute reveal a number of other specific tools you can employ as your community considers ways to strengthen itself.

Ask Why

In any community development effort, one of your most important tools is the question “why.” Asking why helps strip away unfounded assumptions and establish what’s really needed. It shifts the focus from particular proposals, which may divide the community by appealing to entrenched positions, to the underlying goals that unite the community. Having asked why, you can then choose the best way to achieve those goals rather than narrowly focusing on one-size-fits-all solutions.

This simple technique helps identify the most creative, sensible solutions to community problems. It can be applied to virtually any issue. For instance, during one community’s meeting on development, one participant repeatedly insisted that the community needed a big arch over Main Street. Though most participants rolled their eyes or ignored his idea, someone finally asked why he wanted the arch. “We have no pride,” he said. “We need something to make people feel good about this community.” Another participant said, “I agree, we need to build our sense of community. So let’s say that’s what we need to do. Maybe then we can find additional ways to build pride, including the arch.”

The second participant illustrated the point: when discussing a possible solution, ask why it’s being considered. Maybe it’s only one of several possibilities. Others may be more attractive, less controversial, and less expensive. One may appeal to the whole community, including the guy who wanted the arch.

Asking why can help reveal alternative paths through many thorny dilemmas. Struggling with economic problems, many earnest town leaders assume that a new industry is the solution. If they discover later that their chosen new industry will cause big problems, they may forge ahead anyway, blinded by their original assumption. But when an assumption leads to a painful conclusion, the sensible response is to question
it: Why new industry? The answer may be increased income, more jobs, or more savings. New industry is only one of many ways to fulfill these needs.

Assumptions about how to achieve the community’s goals are very different from the values that underlie those goals. Therefore, challenging the assumptions doesn’t threaten community values. On the contrary, it’s the most effective way to achieve the goals that support the community’s values.

Old assumptions blind communities to new opportunities. As your community’s development effort proceeds, notice and respectfully question the assumptions–your own as well as others’–that underlie particular ideas. Are they limiting the community’s possibilities? Are they leading the community down an unwise path? Continually asking why will expose limiting or damaging assumptions and clear the way for more productive problem-solving.

Manage Demand

The conventional response to running out of something is to look for more of it. For instance, facing burgeoning demand in the 1980s, many electric utilities invested in new power plants. They assumed that consumers would pay for this new supply, whatever it cost. But the new power plants were so expensive that electric rates soared. In response, consumers reduced their demand, eventually bankrupting several major utilities.

Such “supply-side” solutions often overlook the true nature of demand. It isn’t electricity that people want, it’s the services that electricity makes possible: refrigeration, lighting, hot water, home heating. But it’s typically cheaper to find more efficient ways to provide these services than simply to increase the supply of electricity. That’s why utilities like the one in Osage, Iowa have learned that they can often meet customer demand more effectively by investing in weatherization and appliance-rebate programs rather than in new power plants. It sounds counterintuitive, but the utility can actually make more profit by paying its customers to use less of its product. The customers, for their part, still have hot showers, cold beer, and so on–and they have more money left over, which filters back into the local economy.

The solutions to many problems are often far less expensive when they address demand rather than simply adding new supply. “Demand management,” as this approach is called, starts by asking what job the user wants done, and then determining the most efficient way to do it. It usually turns out that no kind of new supply can compete with the more efficient use of what you’ve already got.

Some community organizations have found they can play a vital–and lucrative–role in managing demand. In Southern California, for example, a group called the Mothers of East Los Angeles teamed up with water utilities to implement a toilet rebate program. The utilities were willing to pay customers $100 to trade in their old toilets for new, water-saving models, but the program was failing in low-income neighborhoods because many residents simply couldn’t afford to shell out $100 and wait weeks to be reimbursed. The “Mothers,” backed by a private consulting firm, bought the new toilets up-front, hired local people to install them, recouped their expenses with the utility rebate, and had money left over to fund a child-care program. The utilities saved money on distribution costs in the long run, and residents who took advantage of the offer benefited from lower water bills.

Demand-management solutions are not only better for the economy, they’re better for the environment. For example, some cities are realizing that widening roads and highways doesn’t solve traffic problems. “Traffic demand management” programs, such as ride-sharing, can accomplish the same objective much more cheaply. Lester Prairie, Minnesota reduces demand on roadways while supporting local businesses with “Rideshare Bucks,” which commuters earn by giving rides to fellow residents. Funded by a state energy grant, the bucks can be redeemed at local retail outlets. In the program’s first two years, Lester Prairie commuters saved $600,000 in travel and fuel costs (and in the process prevented 100 tons of carbon dioxide from polluting the atmosphere).

Pursue Development, Not Necessarily Expansion

Growth and development aren’t the same. Growth, in the sense of expansion, is an increase in quantity, while development is an increase in quality. This distinction is particularly important to the many communities that are learning the hard way that growth is not the solution to their economic woes. While they enjoy the benefits of growth, they’re also vexed by the problems it causes: higher taxes, traffic congestion, crime, long commutes, air pollution, increasing intolerance, disrespect for traditional leadership, increasingly cutthroat business competition, higher rents, housing shortages, spiralling costs, and demands for higher wages to meet the higher cost of living.

Fortunately, communities have many opportunities to develop that don’t require them to get bigger. They can create jobs, increase income, improve conditions, save money, and provide opportunities for subsistence (non-cash) activities–all of which strengthen the local economy without necessarily requiring its expansion. It’s true that expansion creates jobs in a community; but sustainable development puts people to work, too, without the problems often associated with physical expansion.

Successful communities confronting important decisions about proposed development should ask hard questions: Is this particular kind of development sustainable? Is it something that will support or detract from the ability of our grandchildren to make a living? Will it create problems that the community cannot adequately deal with? Is it compatible with the traditional values of the community? Sustainability can be difficult to determine. Some development ideas are clearly unsustainable; others are less clear. However, it’s worth asking questions early to save yourself the grief of unintended consequences.

Seek Small Solutions

Communities with big problems often seek big solutions. But the bigger the solution, the harder it is to pull off, and the greater the risks. When a community puts all its eggs in one basket and someone drops the basket, the community’s development effort cracks.

Consider the community that puts its hopes in attracting a particular industry. It usually takes a couple of years before the new company makes the final decision to move in. As time passes, unhappy news may come to light. Local leaders hear that the new company will buy (in some cases, take) water from local farmers. “That’s unfortunate, but we need new industry,” say the overburdened leaders. Then they discover that the industry can’t afford to avoid dumping chemical effluents that may seep into the ground water. Leaders, who have already committed themselves beyond the point of no return, say, “There’s no proof that it’ll end up in the ground water and, anyway, we need the jobs.” Later, distressing news: the company will import most of its workers. “Well,” say local leaders, “that’s too bad, but we’re committed now.”

In contrast, small solutions are usually more flexible, less expensive, and more manageable than large ones. When a community embarks on a diverse effort that includes many small projects, each of which can produce results, then the potential for success is high. If a few projects turn out to be duds, no problem. Others will succeed, making the overall effort a success–the kind of success that builds toward a better future.

In 1995-96, Snowflake, Arizona used the Economic Renewal process to select several projects intended to strengthen the community: historic tours for tourists, business education and mentoring, and niche marketing and cooperation among local farmers. Even if one of these projects doesn’t succeed, others will thrive and provide a big win for Snowflake. Better, each of Snowflake’s three projects is diverse by itself. Some parts can fail while others flourish. If Snowflake instead had sought one big solution, it could have netted one big failure. By pursuing many solutions, its strategy was resilient and durable.

This is not so say that your community shouldn’t attempt a large project–just don’t rely on that big project as the sole basis for your community’s success.

Find Problem-Solvers Who Care

Many communities pursuing development seek saviours–a big corporation, government, or maybe a foundation–someone from outside the community who’ll wave a magic money wand and save the community from disaster.

It may happen. Nevertheless, the success of this approach depends entirely on an important decision made by people with no direct stake in the community. They may be terrific people who love their children, but their personal goals probably don’t include ensuring the success of your community. They have other responsibilities, other needs, and other demands on them. Entrusting your community’s future to such disinterested outsiders is likely to lead to delay, disappointment, and an unacceptable loss of control over the outcome.

This is not to say that a community shouldn’t fully use outside resources; on the contrary, an effective development strategy taps outside resources. However, don’t rely on them for your sole support. Depending on outsiders is worse than putting all your eggs in one basket–it’s handing the basket to someone who doesn’t care if the eggs break.

The people who found and provided the fledgling solutions in Tropic, Utah lived there and by all accounts cared about the community. All understood that a stronger local economy was in their interest–they didn’t need to be altruistic to understand that the community’s success would make them more successful.

When looking for problem-solvers, don’t overlook local business people. They, as much as anybody, have an interest in seeing your community thrive. Many care so much about the community that they started a business to remain in it. They’re in it for the long haul. In contrast, outside businesses might be induced to move in, but they’ll move out just as easily if they’re offered a better deal elsewhere. Locals don’t move to Asia to save labor costs.

Increase the ‘Multiplier Effect’

When a dollar enters a community and is then spent outside the community, its benefit is felt only once. If that same dollar is respent within the community, its benefit is multiplied: it adds more value, pays more wages, finances more investments, and ultimately creates more jobs. Thanks to this “multiplier effect,” each additional transaction in which the dollar is involved creates just as much wealth as a new dollar from the outside, but relies on local decisions made by people who care about the community.

Let’s say you sell your particular product outside the community (or you provide a service to a visitor from outside the community) and receive new dollars for it. After you pay your business’s operating costs, you spend some of your new dollars to buy a jacket from a catalogue. A tiny fraction of your expenditure returns to the community to pay the driver or postal worker who delivers the jacket. If you buy the jacket from a local factory outlet or superstore, more of your dollars return to pay salaries of the store’s staff. But if you buy the jacket from a locally owned dry goods store, even more of your dollars stay in the community. Its owners spend some of their profits and a much larger share of their operating costs locally. They may even buy one of your products. It’s unlikely the superstore owners or the catalogue company would do the same. The greatest multiplier effect, and thus the greatest benefit to the community, is achieved when you buy the jacket from a locally owned business that made the jacket itself.

Your community can increase its multiplier effect by plugging leaks, supporting existing businesses, and creating new local businesses–especially if those new businesses supply locals with things that had previously been imported.

Find Hidden Local Skills and Assets

Colquitt, Georgia was a community that appeared to have nothing much to work with. In fact, it had an asset whose importance had, for a long time, gone unrecognized. The mayhaw berry had grown around Colquitt since before the town was settled, but no one thought of it as having any “economic development” value. They thought of the berry simply as something that families canned for their own use.

But one autumn, a small group of creative women canned more mayhaw jelly than their families could eat. They made labels and tried selling small jars of the jelly to specialty stores. The stores thought the product was great and wanted more. The women created a business that went on to employ 50 people who prepared mayhaw jelly and a dozen other products for sale in 36 states.

The women of Colquitt put to work an asset that was literally growing on trees. Though the mayhaw business has since been purchased and moved to another town, it demonstrated that virtually every community has some unique asset or skill that can be put to work creating wealth. It could be a raw material, a recreational opportunity, perhaps a traditional craft or a historical affinity for a certain industry. Hidden opportunities can even be found in waste: in Rifle, Colorado and Hazleton, Pennsylvania, huge greenhouses are kept warm with the waste heat from local power plants. The trick is to examine your community with a fresh eye.

What asset or skill is hidden in your community? As you consider this question, think beyond those that are literally hidden. Opportunities may be right there for everyone to see but waiting for someone like you to recognise and put to work. After all, some of the best ideas are those that, once you hear them, seem obvious.

Build Social Capital

A community’s most important strength is the capacity of its people to work together for the common good. This capacity is often referred to as “social capital.” Like more conventional forms of capital, it’s essential to successful development. Unlike other forms of capital, the more you give away, the more you get back.

According to Harvard political scientist Robert Putnam, social capital is indicated by such things as voter turnout, newspaper readership, participation in community decision-making, and membership in arts, sports, and service organisations. Many people regard these things as not very important, just something you do because it’s fun or necessary. But Putnam’s twenty-odd years of research indicates that each of these activities is an important thread in the fabric of a community. The stronger the fabric, the better residents feel about living there, and the better a place it is in which to do business. In other words, a community’s economic success is based on its social capital rather than the other way around.

Towns succeed because they’re communities, not just collections of buildings and people. This is not to say that residents all agree with one another. On the contrary, they have important disagreements, but they deal with those disagreements in a civil way. They solve problems instead of attacking one another. They know that they can’t just sit back and wait for prosperity; they must work together to seize it.

Successful communities have committed volunteers who serve in many ways, some organised, some quietly individualistic. They have lots of organisations, meetings, events, festivals, and parties. There’s not a night in the week that something isn’t going on. Though one of these activities alone may seem insignificant, together they create the foundation for a community and its economy.

Successful development can result from one person’s great idea, but a community that sits back and waits for that person to come forward is likely to drift in complacency, hoping things will get better. In contrast, a proactive community sails to success by gathering residents to examine where the community wants to go and how best to get there. That gathering is the place where many ideas, including that one person’s great idea, can be offered, considered, and improved upon.

At each step in the Economic Renewal process, you’ll add another building block of social capital to serve as the foundation upon which your community will succeed.

Organise Regionally

Though prosperity for your own community must be the ultimate aim of your development effort, your community is not an island. Taken too far, community-centeredness can crush creativity (“We’re gonna do it this way because we’ve always done it this way”), provoke petty rivalries with neighbouring towns or neighbourhoods, or, worse, cause residents to retreat into narrow-minded hostility toward anyone from the outside.

Just as your family needs the community, the community needs its connections to neighbouring towns, the region, the nation, and the world. The human scale of a community–which is its strength on a social level–can make for limited economic options and few opportunities to make business connections. A smart development effort looks for ways to tie in more fully to the regional economy.

Regional cooperation may take many forms. Perhaps the most common is the regional development organisation, formed by neighbouring rural towns to provide staff support and assistance for members. These partnerships may be public (local governments), private (for example, chambers of commerce), or both. Leaders from 20 isolated and fiercely independent towns in the far-flung Alexander Archipelago of Alaska created the Southeast Conference in 1956 to start a ferry system that today is essential to the region’s commerce. In other cases, businesses may lead the way by initiating cooperative marketing to regional urban centers. Organic farmers in Saskatchewan reached beyond their individual communities to other farmers over a wide region to build a cooperative processing facility for their products. In 1993, the Arkansas Rural Enterprise Center created WoodWorks, Inc., which markets Arkansas wood products to support businesses, create jobs, and promote sustainable forestry practices. The center helps wood-products businesses of all sizes work together and make sales regardless of what town they’re in. The result is stronger, more diversified towns.

This is an update to my thinking and a revisit of those aspects of my life that fascinate me.  I recognise totally that this comes from The Rocky Mountain Institute, and I had the privilege of use some of these ideas in Leonora in developing their five year strategic plan.


One thought on “Nine Tools of Economic Renewal

  1. Project management for numerous small and large-scale development projects. Author of design guidelines for several development projects and local governments thorough the Rocky Mountains. Facilitated projects through the entitlement process of numerous governmental jurisdictions.

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