Social Land Ownership
Land Reform Act Part 2
THE URBAN SOCIAL ECONOMY SECTOR
a discussion paper
|Graham Boyd is a founding member of the Caledonia Centre for
Social Development. Having qualified in architecture and Rural Planning he worked in
Scottish local government before working in the Ministry of Housing in the South Sudan and
with the million houses project in Sri Lanka.
He now works as a free lance consultant
specialising in the training and support of community activists.
|This paper explores the role of social economy
organisations - local exchange trading systems (lets), co-operatives, community
businesses, social firms and self-help groups - in tackling social exclusion and poverty
elimination in urban low-income areas.
It also identifies
a number of key issues and interventions that International Aid organisations and
Municipal authorities can undertake to assist in the development of social economy
organisations in low-income areas.
email comments to
THE URBAN SOCIAL ECONOMY SECTOR
Graham Boyd, Feb 1994, The Caledonia Centre for Social Development
They took their affairs into their own
hands, and what is more to the purpose, they kept them in their own hands.
Rochdale Society of Equitable Pioneers, founded 21st December
The Social Economy can be defined as that part of the economy which is neither private nor public, but consists of constituted
organisations, with voluntary members and boards of directors or management committees,
undertaking activities for local benefit. These organisations can employ paid staff (full
and/or part time) and can trade in the market place, but the motivation is that of community benefit rather than the creation and distribution of
If we view the world as multi-layered and necessarily interdependent - ranging from the
trans-national corporation through national and regional enterprise to small business, the
community and the household economy - it does not follow that any part is more important
than any other, especially as regards contributing to human and planetary well-being. The
analytical framework of the Social Economy uses this as its base, and attempts to bring
all parts of the world economy under the influence of values of people-centred
development. There are different mechanisms for achieving this, including systems
such as community enterprise and LETS (detailed below) which operate at an exciting
interface between the household and community economies and the formal economy.
The Social Economy is growing primarily because the capitalist economic system is
unable to cope with and tackle the intractable issues of poverty, environmental
degradation and escalating wars.
The search is on for ways in which the capitalist economy, and the institutions which
make it up, can be modified to serve people-centred development. Clearly there are changes
occurring in the value base of capitalism despite the world-wide rhetoric about market
There is growing evidence within businesses themselves that factors beyond private
profit must be considered. As communities become more environmentally and socially aware,
companies come to realise that they must win and retain a 'license to operate', by which
they mean the consent of the local community.
This changing value base within capitalism is enabling the growth and acceptance of new
mechanisms emerging from the Social Economy. Below are two examples which, during the last
ten years, have gained increased recognition as being important community-led modes of
tackling the issues of poverty alleviation, employment and the provision of services in
low-income housing areas.
|LETS- Local Exchange Trading Systems|
These parallel systems which are built from the bottom-up are of vital importance in
underpinning the foundation of people's lives in many low-income urban areas. They appear
to have a particular relevance, at this point in time, to UNICEF's search for ways and
means of scaling-up Urban Basic Services programmes through developing a more strategic and systematic approach to neighbourhood-led community
involvement and empowerment.
Throughout this century, and throughout the world, different types of local currencies
have been tried in an effort to create local wealth, stimulate local economies, and find a
way to enable poorer communities to trade in the goods and services that they need.
One of the best known schemes was the Worgel Experiment
which operated in Austria from 1929-1934. Within a year of its launch the experiment had
converted a town with widespread unemployment to one of prosperity. A local currency was
initially developed and was used by the municipality as wages for public works but it
continued circulating as the means of exchange for services and commodities amongst the
local people. This enabled them to trade with each other, where prior to the launch of the
scheme, cash shortages had meant that there had been no means of doing so.
LETS are similar to the Worgel Experiment. They are based upon a new system of trading
which encourages people to trade skills, services and goods without needing lots of money.
The scheme involves exchange, based on a new standard of measure which the participants
establish themselves and record through a simple information system. The idea originated
in Canada in the early 1980s and there are now over 500 LETS operating in at least twenty
developed and developing countries.
The rationale for creating LETS revolves around two issues: poverty
alleviation and local control. Poor people have little money. This means not only
that they have no "store of value" - wealth - but little "means of
exchange". When they get some money, it is spent on necessary items which are
unlikely to be produced in their community. The money therefore does not circulate in the
community but is extracted quickly from it.
LETS schemes function by publishing a list of goods and services offered for sale by
its members, priced in the schemes' own standard unit of account or exchange. Members buy
goods and services from each other and the transaction is recorded by a registry. This
registry may be run using an account book or a computer. Either way the function is the
same - it keeps track of the transactions. All debits and credits are recorded, debits
being goods and services received, credits being those provided. Members are supplied with
periodic statements to keep them informed of their trading position. Successful LETS
schemes have adopted three important principles:
1. De-linkage of the local unit of account from the national currency
This removes the effects which inflation can have on account-holders not immediately
paying back their debts. It also removes any pressure for convertibility between different
LETS currencies thereby avoiding many of the problems that existing financial markets
experience with inflation and interest rates.
2. Debt limits on the total amount of debt held by any one account-holder
Experience has shown that a local system cannot carry a disproportionate debt run up by
one participant, and that large debt reduces the incentive to repay, or encourages
repayment by introducing other elements: the rental of capital assets, for example, rather
than by one's own labour or time.
3. Distinguishing between capital assets and people's labour in the calculation of
This third point is crucial. If the LETS permit the hire of capital assets, this will
perpetuate a system whereby some people will buy the services of others, perhaps for
menial activities, and not contribute any of their own time in exchange. An economic
hierarchy is established in which those who have assets can exploit the labour of those
The LETS system is a not-for-profit service which the participants are providing for
themselves and the community. LETS are therefore a form of self-help community development
process worthy of government and aid agency support. However, to ensure that control
remains in the locality it is important that LETS maintain the essential condition of
local residency as a requirement of account-holders. Otherwise, over time substantial LETS
holdings could accrue to account-holders from outside the community.
Within a locality all kinds of organisations can become involved: individual traders,
self-employed persons, small businesses, community businesses, co-operatives, credit
unions, saving clubs, women's groups, local government, etc. LETS which embrace a wide
range of organisations and individuals are therefore able to supply a much wider variety
of goods and services and thus meet a broader range of needs.
LETS are proving themselves to be an extremely effective way in which people in an area
can gain control over a currency and system which they create at the local level. The LETS
system empowers people through being:
|a way of establishing a local community-based economic system that supplements the
formal monetary economy;|
|a means whereby people on low-income can improve their quality of life by accessing
goods and services not otherwise available to them;|
|a technique of local community development which liberates goods and services within the
community that are currently under utilised;|
|a means of fostering self-esteem and feelings of self-worth, and of encouraging positive
self-reliant action, amongst people trapped in situations of poverty;|
|a tool for developing community awareness and self-reliance in order to overcome local
|an effective means of recompensing volunteer assistants for their time and efforts;|
|a powerful means of conducting needs assessment and skills surveys/audits based upon the
quality of life of participants;|
|a technique for networking effectively within a local community.|
A Community Enterprise is an organisation with social as well as
commercial aims and objectives. It is owned and controlled by the people who live
in a defined locality or who share other forms of common interest. Its major functions
|to own and administer community resources such as land, buildings, equipment and
|to act as a comprehensive local community development focus providing ideas, training
and advice; and|
|to provide a financial service managing revolving loans within a community and
attracting outside capital.|
A Community Enterprise is a trading company which is set-up, owned and controlled by a
local community. Such enterprises create jobs and provide local services.
Over twenty years of experience in many different low-income communities across the
world shows that even in the worst possible circumstances, and where other approaches have
failed, Community Enterprises are, quite simply, able to get things done. In poor urban
areas they have provided the institutional framework around which local community
activists have been able to stimulate economic and social regeneration. Their power to act
lies in harnessing the commitment and abilities of local people.
Communities Enterprises grow out of a particular process of development which leads to
the formation of an Enterprise. This does not happen by chance. Frameworks in which this
local economic development process is able to evolve have been developed. It happens as
the direct result of specialised development NGOs working together with municipal
government and private sector business in the form of a local economic development
partnership which is able to interact with local community activists.
In the United States the local economic development organisation is called a Community
Development Corporation while in the United Kingdom and other countries they are termed
Community Enterprise Development Units.
It is the combination of appropriate municipal level support and local involvement that
triggers and develops the local resources which Community Enterprises are then able to
harness for economic and social benefit.
The Community Enterprise Continuum
The Community Enterprise movement has developed a wide variety of organisations which
fit along a continuum, and embrace the following two important aims:
|to create economic benefits for the community;|
|to create social benefits for the community.|
This continuum has emerged from a decade of experiment and debate about how the varying
aims, objectives and principles of community enterprise can be reconciled:
|profit versus social benefit, |
|jobs versus profitability, |
|voluntary work versus paid employment, |
|entrepreneurship versus collective decision-making. |
The debate within the social economy has more accurately located three types of trading
organisations: Voluntary Enterprises, Social Enterprises and Community Businesses. The following descriptions give a brief
This type of venture provides a local service and is run in a business-like fashion but
uses voluntary labour, for the most part.
Examples of a Voluntary Enterprise include: food
co-operatives, community credit unions, saving clubs, funeral societies and child-care
A Social Enterprise is a business providing social or commercial services which require
some on-going special contract arrangement or subsidy, usually from the municipal council
or a NGO service provider or from within the Community Enterprise Group, or in the form of
some unpaid labour input.
Examples of a Social Enterprise are: community-run public
utilities (bathing places, toilets, water standposts, wells, etc), land trusts, housing
co-operatives and associations. In these the municipality contributes an agreed input
towards the scheme.
In community centres, training trusts, community pharmacies, childcare and pre-school
facilities the municipality or NGO may contribute resources on a routine basis.
A community business has as one of its main objectives to become viable and sustainable
without any on-going external assistance, beyond initial support with start-up costs and
Examples include workers co-operatives, multi-functional
co-operatives, construction partnerships, community retail trading groups, producers
associations and building material supply groups.
There are a number of key principles which a Municipal Council should consider if it
wants to support community-based economic initiatives and which UNICEF can influence and
contribute resources to:
|decentralise the delivery of municipal services to the local neighbourhood level.|
|devolve municipal decision-making about the neighbourhood to a local committee of the
municipality which meets in the neighbourhood and has local residents and representatives
from community enterprises as co-opted voting members.|
|develop a positive attitude towards community-based economic development amongst all
municipal council members and officials as a way of overcoming any barriers which
political and professional practice creates for these initiatives.
|recognise the need to develop communities which have an independent economic life, not
just a dependent community life.|
|use municipal council expenditure in ways that maximise the benefit to the economy of
low-income neighbourhoods: eg. by employing local people and by providing start-up funding
and support services to assist the establishment of community enterprises which can
undertake municipal council contracts and compete for private work.|
|assist community enterprises through breaking down large contracts into smaller
contracts with the municipality effectively acting as the `management contractor' itself.|
|use contracts with Government bodies and private business to promote the concept of
employing local labour and giving priority to local purchasing.|
|seek to use existing or intended expenditure to help community-based economic
development: using additional resources to convert this expenditure into an internal
market for community enterprises: eg. funding and material assistance from international
Community enterprise is about development that benefits people, an idea which is not
new, nor is it limited to specific or special places. It is a very practical way of using
business to regenerate local neighbourhoods.
However, community enterprises are distinctive because
|they put people before profit, |
|community benefit before return on investment and |
|they tackle economic and social issues through a holistic approach.
The benefits of community economic development may accrue to a community over the long
term, and it may be years before they can be fully recognised. It is, however, possible to
identify some visible short-term benefits over a three to five year Urban Basic Services
Assessing the social impact of a community economic initiative should focus on the
following five primary areas. Data collection should be capable of being disaggregated to
take account of gender and age sets.
|How many new jobs have been created and of what kind?|
|How many people have found jobs?|
|Have local people learnt new employment skills?|
|To what extent are local residents managing and running the community enterprise and
|Has involvement in the community enterprise assisted local people in becoming more
|What new services have been provided?|
|What services have been maintained which would otherwise have disappeared?|
|How has the provision of services improved?|
|How are community needs being met?|
|How has the local environment been improved?|
|What improvements in housing stock and conditions have been brought about?|
|What improvements in transport and other services and facilities have there been?|
|Is there a community meeting place, do local residents have the amenities they require?|
|What social facilities are there and are they well used?|
|What land and premises are available locally for new enterprises or activities?|
Primary Environmental Care
|What actions have been taken to tackle primary environmental health care issues at a
household and neighbourhood level?|
|How many community wide campaigns have been initiated and in what (tree planting, refuse
clean-ups, personal hygiene, vector control)?|
|Has employment, services, infrastructure and empowerment become more integrated with
|Has environmental awareness increased in the community?|
|Who decides what is needed locally, who is consulted and what is the process for
assessing the need?|
|How many people are involved in the community\local activities?|
|How many people are involved in community economic development?|
|To what extent do those involved have control of resources and decision-making?|
|Are people more confident about dealing with external agencies: the municipality, NGOs,
and private companies?|
|Have the external agencies changed their attitude to the area, and their expectations of
|Has their been an increase in social interaction and a growth in locally controlled
|Are more people interested in what happens locally in their neighbourhood?|
There are many positive things which UNICEF and its Urban Basic Services programme
partners can do to promote, support and enhance community-led economic development. The
section in this paper titled Key Points for Municipal Councils and UNICEF outlines a
number of important actions
which can be taken.
In moving beyond State and Municipal welfarism approaches UNICEF should be a resolute
advocate and supporter of community-led economic development. To do this, it will require
that Urban Basic Service programmes clearly recognise the need to support communities in
moving towards having an independent economic life based upon self-reliance, self-help and
This requires the recognition of people's abilities to create
their own organisations which capture and retain benefits locally. In this process,
the civic virtues of solidarity, service to others and community benefit are the building
blocks used by the social economy movement. The three families which comprise the heart of
the social economy are: co-operatives, mutuals and voluntary
organisations. Much can be learned from this movement.
During the last two decades the social economy, using holistic community development
approaches, has pioneered an alternative to both welfarism and the
free market. Thereby demonstrating that:
There is another way.
|Community and Economy: A Social Development Strategy. HIE, Inverness,
|At the Heart of the Community Economy: Community Enterprise in a Changing World.
John Pearce, Gulbenkian Foundation, London, 1993.|
|Towards a New Sector: Macro-Policies for Community Enterprise. T.
Crabtree, G. McRobie and A. Roberts, New Economics Foundation, London, 1992.|
Local Exchange Trading Systems (LETS):
|The Living Economy. P. Elkins, Routledge & Keegan Paul, London,
|The LETS System. D. Weston, New Economics Magazine, No.25, Spring 1993.|
|LETS......Change the Economy. D. Seber, New Sector Magazine, No.10,
|LETS: Stalin meets Rothschild. P. Elkins, New Economics Magazine,
No.28, Winter 1993.|
|LETS Business Support Pack. A. Soutar, Western Australia LETS, 1992|
|LETS and Business. L. Rowan, LETSLink Newsletter, 1993.|
|Signposts to Community Economic Development. Edited by Paul Henderson,
Community Development Foundation, London, 1991.|
|Community Business and Urban Regeneration. Andrew A. McArthur, Urban
Studies Journal, Vol.30, Nos.4/5, 1993|
|Community Trading Organisations: A Review of Community Enterprise
Characteristics and Practices. A. Currie, J. McCallum and P. Peacock, CENTRAC,
Invergordon, Scotland, 1991.|
Key Points for Municipal Councils and UNICEF:
|Local Authorities and Community Development: A Strategic Opportunity for the
1990s. Association of Metropolitain Authorities, London, 1992.|
|Communities in Business: The Process of Development. Richard
MacFarlane, CDS Training, Liverpool, 1989.|
How do we Assess Impact:
|Signposts to Community Economic Development. Edited by Paul Henderson,
Community Development Foundation, London, 1991.|
|Managing Sustainable Development. M. Carley and I. Christie, Earthscan,
The assistance of Alana Albee of the Caledonia Centre for Social Development in the
preparation of this paper is acknowledged.