The term People-Centered Economic Development derives from the work of Carl R Rogers and his advocacy for a person-centered approach to therapy. Given access to the necessary resources, he believed, people could resolve their own problems flourish and grow.
People-Centered economics is therefore about inserting these ideas into business and economics. Each community needs access to information resources (hyperlocal networks) and resources for creation of community funding enterprises for profit, with profits to be applied to social needs in addition to private wealth creation (social business)
The core "engine" is a Community Funding Enterprise (CFE), a business which uses its profit to stimulate a given local economy, as described in a 1996 white paper. In this paper, it was reasoned that by creating money as debt based on imaginary numbers, real human beings had been disenfranchised, considered disposable..The way forward would depend on changing the way we do business and sharing information.
From the 1996 paper:
"By going with the normal flow of free-market enterprise and the emerging replacement of monetary capital with intellectual capital as the dominant form of basic enterprise capitalization, it becomes easier to set up new companies primarily on the basis of invested intellectual capital. (See Post-Capitalist Society, by Peter Drucker). In plain English, socially responsible and forward-thinking companies can be set up quickly and cheaply--and these companies have indefinite potential for earnings and localized, targeted economic development. The initial objective is to develop model enterprises and communities, then implement successful strategies from those models into surrounding communities regionwide or nationwide, as needed.
With an initial P-CED business enterprise set up in a given community, it becomes possible to bring people into the fold, so to speak, of the Information Age. No existing company need change anything whatsoever about how it does business. New web development, software development and information management enterprises, for example, can be set up quickly for extremely low seed capital outlays. Existing businesses who need web/software development and management services can have their business readily enhanced for costs that are relatively insignificant compared to increased viability and long-term profitability of entering into a much broader marketplace--without a brick being laid. The design firm wins, the existing business wins. Most importantly, the community-at-large wins by way of decreased poverty and unemployment, since the design firm's profits for the most part go back into the community--for adult education or retraining, high-tech head start programs for underprivileged children, seeding new small businesses, and social relief. Along the way, the design firm's employees benefit from good wages, profit sharing, and normal benefit packages. Well paid employees in effect produce, inevitably, highly desirable social and community outcomes. In short, everyone benefits. In that this new enterprise effectively becomes a primary node and locus of much-needed information for the community, it is appropriate to seek seed capital to start the enterprise from traditional development and aid funding sources. The result is a self-sustaining and self-perpetuating enterprise that feeds on the very need, or demand, for resources that hampered the community and its people to begin with.
With globally dispersed web sites deployed, the global resource base becomes available as a means for each community to best determine resource locations to meet its needs. Such a localized determination of needs, and connection into a global resource network that provides a means to actually address those needs, has not been possible prior to the onset of the Information Revolution and the emergence of the Internet and Web.
The direction and character of our new age of civilization can, for the first time in human history, be proactively determined, planned and managed for the global public good."
At the 2009 Economics for Ecology Conference in Sumy, P-CED delivered a presentation to the opening plenary on the background to the ecomomic crisis, concluding:
"Thus the issue of ecology economics is not only 'the third bottom line', it might be more aptly renamed the economics of survival of the human species. That includes everyone, regardless of one or another economic hypothesis or theory they might prefer. We can endlessly debate and discuss von Mises/von Hayek free market economics/capitalism which proved successful except for the times it failed, and then study why it failed – repeatedly, the most recent failure in September 2008. We can endlessly debate and discuss opposing Keynesian government interventionist economics/capitalism, which proved successful except for the times it failed. That has been an alternating pattern for the past eighty years in Western capitalism. We can discuss the successes and failures of various flavors of communism and fascism. At this point, the simple fact is that regarding economic theory, no one knows what to do next. Possibly this has escaped immediate attention in Ukraine, but, economists in the US as of the end of 2008 openly confessed that they do not know what to do. So, we invented three trillion dollars, lent it to ourselves, and are trying to salvage a broken system so far by reestablishing the broken system with imaginary money.
Now there are, honestly, no answers. It is all just guesswork, and not more than that. What is not guesswork is that the broken – again – capitalist system, be it traditional economics theories in the West or hybrid communism/capitalism in China, is sitting in a world where the existence of human beings is at grave risk, and it's no longer alarmist to say so.
The question at hand is what to do next, and how to do it. We all get to invent whatever new economics system that comes next, because we must."
The Community Funding Enterprise distributes no dividends to shareholders, investing instead in stimulating the local economy by investing at least 50% of surplus revenue in community economic deveopment, retaining the remainder for scaling operations.
Introduced to the UK social enterprise community in 2004, it was argued:
"Dealing with poverty is nothing new. The question became ‘how does poverty still exist in a world with sufficient resources for a decent quality of life for everyone?’ The answer was that we have yet to develop any economic system capable redistributing finite resources in a way that everyone has at minimum enough for a decent life: food, decent housing, transportation, clothing, health care, and education. The problem has not been lack of resources, but adequate distribution of resources. Capitalism is the most powerful economic engine ever devised, yet it came up short with its classical, inherent profit-motive as being presumed to be the driving force. Under that presumption, all is good in the name of profit became the prevailing winds of international economies — thereby giving carte blanche to the notion that greed is good because it is what has driven capitalism. The 1996 paper merely took exception with the assumption that personal profit, greed, and the desire to amass as much money and property on a personal level as possible are inherent and therefore necessary aspects of any capitalist endeavour. While it is in fact very normal for that to be the case, it simply does not follow that it must be the case."
First deployed in Russia, it was used to source an experimental development initiative for USAID in the wake of Russia’s economic and currency collapse of 1998. This became know as the Tomsk Regional Initiative, a project which left behind a flourishing community development bank and thousands of micro enterprises..
In a 2003 development proposal for the Tatar,community of Crimea, it was presented as a strategy for targeted local economic development, as a measure to prevent terrorism through application of smart economic instruments rather than deal with conflict later through deployment of cruise missiles:
"There is no requirement in capitalism for the direction in which profits will go. They can accumulate in the hands of a few people, and they can be made available to meet social needs. Using profit to meet social needs does not necessarily remove the profit motive because everyone involved in such an enterprise is likely to want it to be profitable so that they will continue to have a job and income. This has been the case many times in US companies, for example. A company may have an economic downturn and lose money instead of making profit. Employees often accept lower pay to keep their jobs and to keep the company going. Employees know very well that the company must once again make a profit – end up with more money than it requires to operate it each year – if they are to keep their jobs. Otherwise, it will consume more money than is needed to operate and finally cease to exist when all of its money is gone. Employees accepting lower pay is a way to help return the company to profitability. The employees all share the profit motive. The profit motive is not the exclusive domain of the few people who start a company. It is shared by everyone involved because each has his or her own self-interest in keeping the company going.
"Creating an enterprise for community funding will work for enriching a community just as well as it will work for enriching a few people. The profit motive remains intact. The enterprise is sustainable as long as it makes a profit, just as with any other business. The main limitation is the time it will take to grow enough to provide the money needed by the community. A credit union or bank, by comparison, can make sufficient money for a community available more quickly. These can be funded immediately with sufficient money to service entrepreneurs in a community. In turn, businesses and jobs are created quickly, reducing the overall financial needs of the community. The limitation of a bank or credit union is making enough money in the process of lending money to sustain itself. This money is made by charging interest rates, which must be high for micro loans. It requires much more time, work and therefore cost to lend one million dollars among a thousand different people than lending the same amount to one person, for example. As a result, the interest rates for micro loans need to be high in order to cover the operating costs of making these loans. Even with high interest rates – up to 35% in the present case – it remains difficult to earn sufficient profits to be able to make loans across a wide region where potential borrowers are spread out in remote areas across the region. The cost of outreach, training and multiple visits in that process can exceed 35% interest ultimately earned on micro-loans to remote areas.
"By combining a community-funding enterprise (CFE) with a micro-credit union, the limitations inherent in each one is greatly diminished. The CFE provides sufficient funding to ensure the operating costs of the credit union, reducing the risk that the credit union will have any need to use its capital to sustain itself. The credit union immediately makes available sufficient loan money to match the needs of the community, thereby eliminating the time needed for the CFE to generate the same amounts of money. Additionally, CFE profits over and above what is needed to help with the operating costs of the credit union can be put directly into the credit union. Over time, the amount of money used to originally fund the creation of the CFE is offset by CFE contributions to the credit union. The credit union is increased so that larger amounts of money become available either to make larger loans or to service more borrowers. Together, the CFE and credit union create an enterprise where the original funding not only remains but also increases with time. They complement and balance each other by addressing the economic goals both have in common and offsetting each other’s limitations."
In a people-centered local economy, we move away from the 20th century form of economics based on production, profit maximisation and scarcity toward local economies which are sharing and people-centered. The focus is on people, particularly those in greatest need. An economics for humanity, as described in a 'Marshall Plan' for Ukraine:
'This is a long-term permanently sustainable program, the basis for "people-centered" economic development. Core focus is always on people and their needs, with neediest people having first priority – as contrasted with the eternal chase for financial profit and numbers where people, social benefit, and human well-being are often and routinely overlooked or ignored altogether. This is in keeping with the fundamental objectives of Marshall Plan: policy aimed at hunger, poverty, desperation and chaos. This is a bottom-up approach, starting with Ukraine's poorest and most desperate citizens, rather than a "top-down" approach that might not ever benefit them. They cannot wait, particularly children. Impedance by anyone or any group of people constitutes precisely what the original Marshall Plan was dedicated to opposing. Those who suffer most, and those in greatest need, must be helped first -- not secondarily, along the way or by the way. '
For example, local food and energy production with distributed local manufacturing.
In the US Local Food Systems inc make the distinction between a production and a people-centered local economy, saying
"For some, a local economy is production-centered as represented in the graphic above. In this model, production is the starting point in the center. Examples include goat cheese (thanks to Abbe Turner and Lucky Penny Creamery for hosting our session!), lambs for meat, and CSAs. Output, whether food, water, energy, fuel, or housing and clothing, targets specific market niches among people in the outer ring (the arrows point outward). Output has the option of passing through the steps of processing, preparation, and retail along the way. The system is designed according to three organizing principles: money rules, keep your business to yourself (the brutal free enterprise system at work), and scale up at every opportunity to extract a competitive advantage."
"The alternative local economy is people-centered, as depicted in the graphic above. In this instance the system starts with people as a market block in the center who, collectively, draw the output of the various systems to them based on satisfying a critical need in the most affordable, convenient, healthy, safe, and secure manner. In other words, people in a local area become the integrative agents who define the system and bring the elements together on their terms. This can be as simple as serving a plate of food from local sources, or as complex as manufactured components and assemblies in a major advanced energy installation made in local distributed manufacturing operations. "
The fundamental policy guide for P-CED is the International Bill of Human Rights. IBHR is comprised of Universal Declaration of Human Rights; International Covenant of Civil and Politial Rights, and International Covenant of Economic, Social and Cultural Rights.
People-Centered Economic Development is a partner in the Charter for Compassion.
"Substitute personal greed with compassion, and the balance sheets will still work out just fine. Profit/loss statements take on a whole new dimension and meaning. Greed and capitalism are not one and the same thing. “Social” capitalism, social enterprise, is perfectly doable. This is the most effective sustainable strategy available for alleviating widespread human suffering stemming from poverty and all that comes with it — up to and including terrorism.”
Terry Hallman – founder, P-CED (1952-2011)
See also the Forward Foundation on Comparing Business Development Paradigms
P2P foundation People-Centered Economic Development
History of People-Centered Economic Development