Preston, 2013. This Lancashire town, ravaged by the Financial Crisis, faced a bleak future. In the bottom 20% of the UK Deprivation Index, the collapse of a planned £700mn shopping complex perpetuated Preston’s woes. An impending 40% slashing of its central government budget was about to pull it further into oblivion. Few, if any spectators would have chosen this beleaguered town as the scene of an economic revival. Yet now, half a decade on, Preston is being hailed as a model for the future generation. A beacon for the post-capitalist world, transforming its economy through a wave of cooperative ventures and localism that created wealth and prosperity in its wake.
Preston’s mission is grounded in creating wealth for the local community and not the corporate elite. The results prove an unambiguous triumph. The Co-operatives, which are democratically run by workers, stop leakage and increase the earnings of local workers. Unemployment is now below the national average at 4.1%, contributing to Preston being the second largest improver on the Deprivation Index from 2010-15. Preston is a shadow of its former self, no longer epitomising the deindustrialised North that suffered at the hands of austerity. Winning the Best City to Live and Work in North-East England in 2016 served to cement Preston’s legacy from a momentous economic turnaround, creating 1600 jobs since 2013.
Nobody would have predicted it. And given the troubled circumstances in 2013, we were right not to. Thus it was a transformation of the entire economic structure, creating a new path on which the town would walk, that enabled recovery at such speed and tenacity to prove all doubters incorrect. John McDonnell has praised it as a prototype for Labour’s economic policy, incorporating it into the 2017 manifesto pledge to double the size of the cooperative sector. This transformation was grounded in two fundamental principles; localism and cooperativism.
Inspired by similar projects in Cleveland, USA, and the Basque Country, Councillor Matthew Brown – the architect of the Preston Model – set upon a mission of “a long term collaborative to community wealth building”. The 6 local institutions that signed up to be bastions of this plan for economic revival – including the constabulary, education institutions and Lancashire’s largest social housing organisation – epitomise the fundamental problem at the core of Preston’s failure to create wealth for its people. Of the £750mn they spent annually, only 39% was spent in the Lancashire region. £458mn was leaking out of the local economy, exacerbating Preston’s economic woes by limiting the demand for its suppliers. Brown redesigned the procurement process to prioritise local suppliers, and has since witnessed the explosion of local supply networks that have followed. A £600,000 printing contract by the Constabulary was kept in Preston, in addition to the division of a £1.6mn Council food contract across farmers in the Lancashire heartlands.
Yet Preston’s ambition continued further. In a challenge to the prevailing capitalist order grounded in a hierarchical corporate structure to maximise profits, the Preston Model had its foundations laid in cooperatives. This model of giving workers and consumers a stake in determining the corporate future has proven not only successful for Preston, but also across the globe. By harnessing the power of those most involved in all stages of production, twice as many cooperatives survive the first 5 years of business than other firms. Cooperatives can vary across countries, from shares that appreciate in value in the Pacific Northwest plywood industry to the Italian cooperatives, where shares are paid back at the nominal value and capital is collectively owned by the members. And yet still the evidence proves the uniting feature amongst them all – superior productivity. Studies have proven it a more efficient mode of economic production. Firms that convert to cooperatives would be able to produce more given their current technology than they can at present, increasing their productive capacity. Given the current position of the UK as the productivity laggard of the Western World, Preston’s model could be the answer.
The Preston cooperative network has extended its reach across all sectors in the local economy. Most recent is the Guild Union, a cooperative credit facility that provides cheap loans to local businesses to increase investment. Credit rationing after 2008 created a significant struggle for riskier small businesses to access the funding they needed to grow and expand, with this initiative contributing to the £200mn return to Preston’s economy that the model has thus far achieved.
There is no wonder why the cooperative movement is extending its reach across the globe. New York City, the birthplace and epitome of US corporate capitalism, has begun a $2.1mn initiative to expand to cooperative network. A city symbolised by the capitalist profit of Wall Street has begun an economic experiment in the footsteps of its Northwestern UK counterpart – a momentous shift in economic ideology. Moreover, the oncoming wave of retiring Baby Boomer small business owners creates fresh opportunities for cooperative conversion, providing a golden opportunity to fundamentally alter the economic structure.
Yet despite the undoubted success that Preston has enjoyed, there is reason to be cautious of saluting this as a beacon for the post-capitalist world. The discipline of economics was founded upon the unwavering assumption of maximising profits in exchange, wherever in the world your supplier may be. Promoting localism may undermine this core principle by acting as an obstacle to getting the goods at the lowest price, as such preventing the perfection of the free market from functioning.
However, far from being a contradiction of microeconomics, the Preston Model may have unearthed its hidden secret. The assumption of profit maximisation from the times of Adam Smith has appeared to collapse under the community spirit harnessed in Preston, where rationality has come to define maximising welfare and happiness instead. The ‘social capital’ galvanised from the cooperative model capitalises on the positive relationships between individual workers to drive productivity, as opposed to the less humane capitalist corporate hierarchy. After 2 centuries of industrial and globalised capitalism, cooperativism could reformulate the economic order away from individualistic profit and towards community equality. Behavioural economics has redefined what it means to be rational.
The Preston Model must be praised in the UK as national treasure. Not only for its mark of human ingenuity, seeing a light as the town slid further into recession, but also in its desire to challenge conventional economic wisdom to enable community spirit to triumph. Creating a local economy based on morals, social capital and welfare maximisation rather than extraction and profits could reunite our divided island, where the Brexit vote epitomised the enormity of the wealth disparities in Britain. Preston is living proof that cooperatives are a significant force with which to challenge the economic order. And one day, it may be hailed as the town where the post-capitalist era was born.