What are Economies ? Diverse Economies Framework DEF Local Economic Inventory Strengthening Diverse Economies

Strengthening Diverse Economies

How can local economic development strategies increase well-being directly?

One way is to strengthen the resilience of the local economy. Resilience is the ability for economic and ecological systems to absorb disturbance, reorganize and change while supporting life.

In natural systems the more diversity of species, the more resilient is the ecosystem when faced with shocks like food scarcity or storm damage. And the more that energy circulates as inter-related inputs and outputs within the system the more robust it is.

We can think of a local economy as an economic ecosystem. The more diverse its economic activities, the greater ability it will have to withstand shocks like crop failure, market downturn or business closure. And the more that economic value circulates within the economy and does not leak out of it, the stronger it will be.

To promote the health of a local economy we need to:

1. Increase economic diversity

2. Increase the circulation of locally produced goods and services and take-up by local consumers

Increasing economic diversity

Doing a local economic inventory will expose how diverse the economy is.

Starting with what you have:

Most communities contain a diverse range of transactions and labour practices, but often the non-monetized activities are ignored as contributors to economy development.

Strengthening the diversity of a local economy involves recognizing the community value of activities like:

  • gift giving
  • sharing
  • barter
  • volunteering
  • reciprocal exchange 

It also involves making it easier to engage in these practices, for example:

  • setting aside space for a transfer station where goods can be gifted, shared or bartered
  • matching up social and environmental needs with willing volunteers
  • establishing a local economic trading system


Building from where you are:

Many communities do not have a diverse range of enterprises. Enterprises are either small self-employed businesses that barely provide a living for the proprietor, or larger capitalist enterprises that employ wage labourers and make private profits for their owners. Small businesses are usually locally owned. Capitalist enterprises can be owned by local wealthy families, but more likely they are owned by absent owners or shareholders.

What is often missing is community owned and run enterprises that both provide a living for those that work in them, and generate profits that can be used to strengthen the business and circulate as social wealth in the community. Community owned businessed can take the form of worker-owned cooperatives or social enterprises of various kinds.

Increasing the diversity of a local economy means diversifying the ownership structures of enterprise. With a greater proportion of community owned enterprises a local economy is assured that profits will not drain away to private hands and that local employment will be a high priority when making business plans.  

Capturing and circulating local value

A local economy that relies on imported inputs to keep production and life going is vulnerable. And a local economy that relies on exporting all of its product to buyers outside the region is vulnerable.

Vulnerability can be avoided by producing a big range of products that all tap into different markets. But this option is not usually possibly for small rural economies.

Another way to reduce vulenrability is to plug the leaks out of the local economy by increasing the circulation of goods and services within it. This can be done by: 

  • maximizing the use of local inputs
  • replacing imports with locally produced goods
  • servicing the needs of local consumers

Starting with what you have:

Asset mapping will help to identify all the physical, environmental, social and cultural attributes that can be reframed as inputs into local economic development.

Building from where you are:

Community partnering is a process that you can follow to mobilize these local assets and begin to experiment with diversifying the enterprise profile of the local economy. Keep in mind that there are consumers who may be very keen to support local products. But markets have to be made by building up social relationships. In any local area there will be immediate opportunities for capturing local value and plugging the leaks of value out of the community. Identifying some leaks to work on is a first step.