As economic inequalities widen between large urban areas and small cities and rural areas, place-based programs are becoming more and more popular. They are focusing on boosting economic opportunity by tailoring actions to regions’ specific needs. Some policymakers are using these programs as an opportunity to rethink traditional, top-down approaches to economic development. They’re recognizing that communities themselves are the most effective drivers of local economic development.

California’s Jobs First Regional Investment Initiative (PDF) is executing this vision. It is a landmark investment of $600 million to support “Jobs First Collaboratives” (PDF) in each of the state’s 13 economic regions. The initiative is focusing on creating equitable, resilient, carbon-neutral, high-road economies by centering community members and workers in the planning process.

One key challenge, however, is that capitalism—the dominant economic system in the United States and much of the world—though it may be capable of supporting job creation and economic growth for some, is simply not set up to prioritize the initiative’s concurrent goals of environmental sustainability, worker empowerment, racial equity, and community health and well-being.

As part of the Urban Institute’s work with the Sierra San Joaquin Jobs Initiative in California’s Central Valley, we investigated alternative economic frameworks that can work within and beyond the confines of capitalism to better balance regional economic competitiveness with its equity and climate goals. We found two models—local and solidarity economic frameworks—are well suited. Examples from Arizona and Jackson, Mississippi, offer lessons for how local and regional actors can operationalize these frameworks to build more equitable, sustainable economies.

Advancing local economies by shifting power from corporations to communities

Local economies maximize residents’ autonomy by creating self-reliant, democratic economies that shift ownership and decisionmaking power from corporations to community members. They do so by prioritizing local business development over external business attraction (PDF), building healthy local supply chains, and promoting economic democracy through community governance.

Workforce and economic development plans often try to attract (PDF) large corporations to expand in their market or relocate their headquarters. However, research shows this isn’t enough to fully address regions’ socioeconomic challenges and often doesn’t yield new jobs and economic benefits. Adopting a local economy frame refocuses planning efforts on developing existing local businesses and achieving sustainable markers of economic success, like net new jobs, productivity, income growth, improved job quality and job permanence, and other quality-of-life measures. Research also shows independent, locally owned businesses recirculate a far greater percentage of their revenue in the local economy—up to three times more—compared with businesses that are not locally owned or that are publicly traded.

Founded in 2003, Local First Arizona is a statewide community and economic development organization that works to create people-centered local economies. Its broad programming combines consumer education, storytelling and business promotion, small business training and technical assistance, policy advocacy, and microloans to support the development of resilient local economies. They provide tailored programming for underrepresented businesses, including Black-owned businesses, Latino-owned businesses, and those in rural communities. Local First Arizona has helped rural and tribal communities win more than $46 million in grants, assisted more than 3,500 local businesses in growing profits and jobs, and influenced a 520 percent growth (PDF) in community bank deposits.

Building solidarity economies that create stability and empowerment

Solidarity economies are grounded in principles of cooperation, equity, social and economic democracy, sustainability, and pluralism. The common elements include cooperative business models; shared ownership of land and housing, capital, and other resources; mutual aid networks; and other practices that build community power and prioritize people and the planet over profit.

Research has shown that these principles translate to tangible benefits: during times of economic volatility, evidence shows worker-owned businesses perform fewer layoffs (PDF) and experience greater employee retention (PDF). A study of cooperatives in four countries (PDF) found that, in addition to contributing to the economic development of communities, cooperatives contribute positively to women’s economic empowerment and can help close global gender gaps. 

Cooperation Jackson was founded in 2014 in response to chronic unemployment and impoverishment, resulting in part from decades of disinvestment, deindustrialization, and suburban flight. Its mission is to “advance the development of economic democracy in Jackson, Mississippi, by building a solidarity economy anchored by a network of cooperatives and other types of worker-owned and democratically self-managed enterprises.” In the decade since its founding, Cooperation Jackson has helped establish six local cooperative enterprises, with five more in development, in addition to a community land trust that now stewards more than 45 properties. Its long-term vision is to put control of capital, the means of production, and other critical resources back in the hands of Black and other workers of color and expand economic opportunity, promote sustainability, and build community wealth in Jackson.

How local and regional actors can advance alternative economic frameworks 

Local First Arizona and Cooperation Jackson show how implementing alternative economic frameworks can create more equitable, sustainable, and resilient economies. Economic systems take time to shift, and to begin planting the seeds of these alternative economies, local and regional stakeholders can incorporate the following steps:

• Invest in and support the growth and resilience of new and existing locally owned businesses, especially those that provide critical goods or services, through measures like grant programs and tax credits and incentives.
• Improve access to capital for local entrepreneurs through revolving loan funds and microloans. Programs can aim to close racial, gender, and geographic financing gaps by focusing on populations with less access to generational wealth and social capital and who are most likely to be affected by discriminatory practices from financial institutions, including people of color, women (PDF), and immigrant business owners.
• Encourage and facilitate shifts to alternative forms of ownership across all sectors, including by promoting worker-owned co-ops, community land trusts, community solar, and other models that shift power to communities.
• Advocate for or implement participatory budgeting in local government spending.
• Enact procurement policies that mandate socially and environmentally responsible business practices and prioritize locally owned and cooperative businesses.
• Support and fund organizations that provide training and technical assistance, peer learning, and access to capital.
• Support collective movements (PDF) for economic liberation and democracy by investing in storytelling and narrative change about concrete initiatives that support tangible improvements in community well-being, economic resilience, racial justice, and environmental sustainability.

The Sierra San Joaquin Jobs Initiative’s recently launched regional investment plan (PDF) used these principles to build strategies that will develop a responsible food system industry cluster and support small business and microenterprise. It details the resources and timeline needed to launch programming to support farmers cooperatives, develop a collective land ownership pilot, establish a flexible fund for local entrepreneurs, and enhance access to training and technical assistance for business owners through both virtual and in-person learning communities. Evidence suggests this approach can build toward structural economic changes and improve community and individual outcomes for residents who have historically been excluded from prosperity.