Four Steps to Self-Reliance

The story behind Rocky Mountain Institute's
Economic Renewal Project

One of the articles in Sustainable Habitat (IC#14)
Originally published in Autumn 1986 on page 41
Copyright (c)1986, 1997 by Context Institute

You can’t have a sustainable habitat if it isn’t economically viable, as all too many communities and households have discovered. Fortunately, the folks who figured out how to sustainably overcome the energy crisis are now working on the community economic crisis.

L. Hunter Lovins is president of Rocky Mountain Institute and co-author (with Amory Lovins) of a number of books including Brittle Power and Energy Unbound. She and Michael Kinsley, former county commissioner and now director of the RMI Economic Renewal Project, have spent the last two years developing and refining a plan for economic renewal in communities, be they small towns or neighborhoods. Their work since this interview includes positive test runs in two communities.

The four basic principles they work with are these: plug the unnecessary leaks of money from your community, strengthen existing businesses, encourage new local entrepreneurs, and carefully recruit outside business. These are useful starting points, but what makes their work especially appealing to me is the high level of research and insight that RMI has brought to translating these principles into a working program. For more information, contact Michael Kinsley, ER Project, RMI, Drawer 248, Old Snowmass, CO 81654.

Could you begin by describing the Economic Renewal Project, what it grew out of, what the hopes are around it, and how far it’s come?

Hunter: The project grew out of Michael’s and my talking informally over a summer. We were both concerned with what was going on on the western slope of Colorado with the collapse of the plan to mine oil shale and the impact that was having on a lot of little communities. We were equally concerned with what would have happened if oil shale had gone ahead, and all of this was being talked about in the context of economic development. The reason the western slope wanted oil shale was economic development, and its demise was said to be a failure of economic development.

It seemed to us that we had learned something during the ten years or so since the Arab oil embargo about community energy planning and how to meet people’s local energy needs through local resources in a way that saves people money and provides more money running around in communities, creating more economic wealth. We started chatting about whether that example could be used as an alternative to oil shale, which would have been, I think, the largest engineering undertaking in human history, bigger than the Panama Canal.

The little western slope communities would have in effect disappeared. Some folks thought that it was just great. They’d like to make a lot of money, but while a lot of people living in the communities were saying "We’ve got to have economic development so we might as well have oil shale", they were also saying "We are really scared about what’s going to happen to us and our way of life."

To say that what we’ve learned from community energy planning could even dream of competing with that is almost ludicrous, yet on the other hand, if small communities want to stay small, then maybe they need to start looking for a different way of doing economic development so that there is enough wealth in the community that people can live quality lives. Not extravagant lives, but not living in poverty. And that means you need some sort of economic activity in the community. It seemed to us that the first thing that a community ought to do is to stop the outflow of dollars for necessities bought outside of the community. In energy, the numbers are real clear. An average community spends something like an amount equal to the payroll of a tenth of its population each year to buy energy; 80 to 90% of that money immediately leaves the community. There’s no retained economic value, and very simple weatherization and solarizing techniques can keep a lot of that money at home.

As an illustration, in the San Luis Valley over the Continental Divide from here, folks had a little energy crisis. For generations, they’d been cutting firewood to provide their energy, but then a corporate landowner came in and bought the land, fenced it, and starting shooting at folk. So Andy and Maria Valdez started going around building low-cost solar greenhouses. They ran greenhouse barn raisings. Stuck them on the sides of mobile homes. Built a solar post office and a solar mortuary and all that stuff. What cost $35 million when it was all added up (mostly spent at local lumber yards and hardware stores) is now saving something like $45 million a year. What they thought they were doing was meeting an energy problem. What they’d in fact done was to create an economic development program of keeping more money in the community.

Robert: Right.

Hunter: Well, as Michael and I were chatting, we said, "Is it possible to extend that kind of thinking beyond energy? What are the other things that people buy from outside the community?" Since then, we have arbitrarily chosen six necessities, which are energy, water and waste, food and agriculture, health care, housing, and the flow of money itself. We’ve looked systematically at what communities have done to stop the outflow of money, to provide more of those necessities locally. And we found just fabulous examples of little programs run by communities. I think now we have 300 case studies of what communities have done to keep money at home, increase their self-reliance, and increase their economic vitality.

Now, you can argue that clothing and entertainment, in particular, ought to be considered necessities to be provided locally. We stopped at six. However, there is no reason that, if a community had worked through the six, it couldn’t go on to look at more. We did not include things like pickup trucks from Detroit or coffee from Nicaragua, because we’re not talking about isolationism. Clearly, a vigorous commerce contributes to everybody’s quality of life.

On the other hand, trading to your disadvantage for necessities of life is not necessarily an economically wise thing to do. A community ought to be in a position of choosing where it wants to trade and trading to its advantage. Many rural communities are in effect third world countries. They are resource colonies of a larger urban area, and they are being ripped off. If they begin to provide more for themselves and look more carefully at their economy, we think there is a lot they can do to build sustainable, locally based economies.

After we messed around with those concepts for a time, we decided that, if we are actually going to get into the notion of economic development, we ought to talk to somebody that does economic development and see if any of this stuff was new or if we were way off base. So we called up George Gault, who was the county manager of Delta County west of here, who had been doing a lot of interesting economic development work and writing some papers on it. George’s argument has always been that small communities oughtn’t to think that their salvation is in recruiting somebody from outside, which is what is traditionally considered economic development. For most communities, there’s no one who will come. There are something like 500 major plant relocations in the U.S. every year, and there are 20 to 30 thousand little economic development outfits, all bidding for those same major plant relocations. Just on the numbers, you aren’t going to get one, for the most part.

Well, what do you do then, just roll over and play dead? Obviously not. You start building a local economy based on what you have at hand. And what you have at hand are the businesses that are already there. He feels the greatest job creation potential within a community, and the best chance to do real economic development for most communities, is to increase the viability of your existing economic base, those small businesses within the community. And there are some very simple things you can do to do that. He put together a little outfit in Delta County called Forward Delta County which over the last five years or so has created about 100 new jobs each year, with no outside industries coming in. Now he also works really hard to get an outside industry, because if he can do that it’s a big win. But he really focuses on enabling the businesses that are in the community to be just a little more viable, add another person or two.

Robert: What are some of the key ways that he does that?

Hunter: He looks for ways to add value to products. He looks at products that are now being sold out of the community and looks for a way to process them just a little bit more so that you can sell them for a higher price and get more of that value in town.

He had one particularly neat scheme. There are a lot of sheep grown on the western slope, and they all get shipped over the divide to get slaughtered. So he said, "Let’s set up a lamb slaughtering plant. To set up a lamb slaughtering plant you’ve got to feed them. Let’s set up a pellet plant and make alfalfa pellets." To do that, you’ve got to get farmers growing alfalfa. That puts back into production a lot of land which otherwise would have gone to development or stood marginal. To do that you need irrigation, and that justifies putting in an irrigation project up in the canyons. Doing that justifies irrigating some high orchards. They have the mesa country over there that used to have orchards on it. The irrigation water had all gotten bought out by Exxon and the other oil shale companies. But if you go and put in the irrigation projects for the alfalfa, then you can do some irrigation for the orchards and put them back into production. If you do that it justifies putting in a little micro-hydro plant up the way. So that just boot straps all of these projects on top of each other.

He said to us that we really ought to focus on developing local industry and we said, "Super, why not? Let’s have two principles: stop the outflow of money and invest in yourself." But then Michael said, "You know, we’re beginning to sound just like the folks I’ve been fighting for ten years. If we’re going to get into this business of hyping up low level economies, we’ve got to have some balance." I said "Okay, how?" Out of that came a concept that a community ought to balance the net gain that it gets from encouraging new economic activity with what it costs to do it. What it loses in free land, tax abatements, free water, clean air, clean water, quality of life. It ought to attempt to quantify these. But if it can’t quantify them, at least it ought to put out in a systematic way the issues that are really facing the community, before it goes into these decisions.

So we decided to go hunting some foundation funding to pay for the research and see if we could actually put together a how-to-do-it- manual and then run it in a little community and see if it works. Then, we brought on some staff. As all of us were talking it over and thinking about it, we decided that the second principle was too negative. If we’re going to run this in communities – besides Carbondale down the road, where folk are already lined up in this direction – then we need to pitch the cost benefit analysis in a way that doesn’t sound like no growth. We shouldn’t be imposing our values on the community. We should be presenting the community with tools to help it think through its problems and come to its own solutions. It occurred to us that supporting existing business was really two separate concepts: supporting the businesses that were there already and supporting people within the community who had the potential to set up new businesses. So now we had the first three principles.

Then came the fourth: look for ways to attract outside industry. And it turns out there’s a lot of neat information on how you can target industries that might want to come settle in town and do it in a way so that the community really gains. Lots of folk are now doing what is called the targeted industry study, where you decide what industry it is that you want. You don’t just broadcast to everybody; you identify what the community has in the way of resources. What are its values, its goals?. What kind of industry would be compatible with that? Then you identify the industries that fit the appropriate SIC (Standard Industrial Classification) code. It tells you the names of the companies, right down to phone number and managing folk, so you can call them up and say, "You’re for us, and here are reasons that you ought to come locate in our community. "

Montrose, which is just down the way from Delta, was doing a targeted industry study and one of the industries that they were thinking about heard they were doing it, called them up and said, "You sound like a town that’s got its act together. We want to come settle there." And they ended up getting this industry without even asking them.

So we have built in a framework for judging whether or not the new industry would be a good corporate citizen or contribute to the community. Then we started in on the how-do-you-actually-do- this-in-a-community part. Most of our work since then has been drawing up the work book. We’ve talked to dozens of people around the country who have done economic development, community organization, energy planning, etc., and the word we keep getting back is that programs succeed or fail based on the people who run them. It’s not so much the ideas. So we started concentrating on process. What will it take to make these ideas work? How do you identify and draw out the indigenous leadership and equip them to run the process in their community? How do you make the process truly community owned, as opposed to imposed from the outside?

Robert: And what have you been finding?

Hunter: Well, the result is now two three-inch thick loose leaf notebooks of material. Some of it is text: what the state of the world is in housing and what a community can do about it. Some of it is worksheets: how to systematically identify what your problems and opportunities and implication strategy are in, say, housing or supporting existing business or encouraging local entrepreneurs.

Robert: That’s a fairly detailed level of process.

Hunter: It’s a very detailed level of process. Down to the level of "Take five minutes and talk over what you’ve just learned."

Robert: Have you given any thought to the sustainability questions? A lot of the material that you’ve been focusing on are things that people can do directly that hopefully will work over the long run. But what’s the next step? If those initial strategies work, how does that work into a longer program?

Hunter: We won’t really know the answer to that question for 5 or 10 or 15 years in the communities we work in. The process itself should be reiterative. A community gets together a group at one point, studies its present economy, and draws up an implementation strategy, which could have dozens of things to do. Then it starts pursuing them in whatever order it wants to. We gave lots of thought to whether there should be an official community advisory board consisting of the mayor and various mucky- mucks, and we decided that economics has really always been a process of entrepreneurs. The economy of a community (to the extent that it is not determined by federal subsidies and other outside factors) really is a process of the market. Somebody needs to decide that they’ve got something they can sell and get into the business of it. And our trying to dictate to a community how to run its economy would just be silly. The only thing we can do is pull together a group of folk from the community, stir up a lot of ideas and see if anybody in the community wants to run with it. And advisory boards are useless for that.

Robert: Have you given any thought to dealing with factionalism?

Hunter: A lot. There are direct statements about it in the workbook and in the process that would be run. We’re also drawing up a separate facilitator’s manual for how to run group meetings and not have everybody at each other’s throats. But we pretty much take it head on that you guys have the choice. You can fight, or you can recognize that there are different factions in the community and that you need to at least honor the other person’s right to have a different opinion, in order to continue the process. There’s nothing we can do to keep a community from fighting itself if it wants to. All we can do is try to make the negative results of that sort of fighting apparent to them from the outset.

We include a lot of exercises that seek to have a community identify what it is about their community that they care about, what it is they don’t like, what changes they would make, and the results of those exercises are made available to the group anonymously, the intent being to let people know that there is a real diversity of opinion. Discussion time is slated for just that purpose. There are people in the community whose vision of the future of the community is different than yours. Is that okay? And how can you work together to achieve things that you agree upon and go your different ways at the point at which you disagree, but at least make the community economy sustainable enough that you can all keep living there?

Robert: I’m thinking of a scenario where the people who are attracted to the community renewal committee have a lot in common but are not representative of the community as a whole. I think of the all-too-common experience in third world countries where the technical assistance has come in and increased the income gaps and the polarization within the community, because the craftiest farmers make the best use of the material that comes in, and the others just get left further behind.

Hunter: The way we sought to deal with that is to build into the front end at least a two-month process of somebody (not us) going around in the community and identifying the major different entities: the old woman who taught everybody school from fourth grade on, the pro-development folks, the anti-development folks. And identify all of these different types and then really persuade them that their participation in this process is essential. There are several exercises built in to validate their opinion, noncritical exercises where they put forth what their vision is. Ultimately, as everybody said, the whole process will stand or fold on the people running it, and the only thing we can do is try and make every effort to pick the right group of folk in the community to hand the project off to.

Robert: As long as it requires involvement from RMI staff to initiate it, that certainly limits the scope of its getting out there.

Hunter: Yes, but we can do a lot of communities, if all we have to do is phone conversation, letter writing, trying to get a sense that the person we’re talking to is the right person to run the project. Plus a trip there to talk with that person and spend some time in the community and get a sense of it. Then let that person assemble a representative group of folk. Then maybe a trip back to meet with them and also have an introductory meeting for the community.

We’ve got the design for a packet at this point that will cost under $10,000 for our participation, the workbook, and everything. Now that’s affordable for most communities. And if the project works, if it has genuinely made some community economies much stronger, communities that want it can get a foundation in their area to pay for it.

Robert: It’ll all be worth it?

Hunter: Yeah. And I have no doubt that folks will be able to come up with that kind of money. Another possibility is that we will test it, revise the materials, and put the workbook up for sale. Send in 5 or 10 bucks and you’re on your own. Go for it. You know, if we trust the process, we’ll realize that some will succeed and some will fail, and that’s the way life is. Another possible model is that we will spin off an outfit which provides these services to communities.

We do want to keep very tight control until we’ve tested what we’ve got, so that we don’t go giving folks something that’s gonna really mess them up. Once we have some confidence that the thing’s got value, we’re not at all possessive about it.

Robert: So it’s not available until ’87?

Hunter: That’s right; ’87 at the earliest. And that’s assuming that it works well and that we have some confidence in our ability to revise it. If it fails, we will certainly put out some publications based on it. If we have success at all with the worksheets, we’ll put them out. We’ve got a lot of people who want them, people who already have their own process that they run, like Community Extension in Missouri. They have field workers out all over the state, already working in communities. They have a whole process they already run, but they’re desperate to get the worksheets. They think the substance of what we’ve developed is really good. Over the last year, we’ve been putting the book out to peer review as chunks of it get ready, and these community extension guys were some of the folks we sent it to.

We have gotten no damning criticism, except from some people who feel that we’re being too autarchic, too stand-alone. They feel that communities shouldn’t try to control the flows of goods and money through, that that’s the job of the free market, that communities are just tiny little cogs in a massive international marketplace, and that to try to artificially restrict that in any way is a violation of some mythic principles. There’s a genuine philosophical difference between people who believe that communities should be taking a role in their own future and people who believe that they’re just fodder.

Robert: Have you thought about the macro-implications?

Hunter: We feel, based on our experience with energy, that there’s a big chunk of political philosophy missing in this country. We have no political theory to deal with the community. We have the whole political tradition which came out of Hobbes and Rousseau, based on the individual and the nation forming a contract. There weren’t any of these local voluntary associations and local governments and water districts and all of that sort of stuff. Just didn’t exist. Now there are groups like homeowners’ associations, and they are very effective at coping with a whole range of problems and meeting peoples’ needs in a very local, more or less appropriate, responsive way. Well, we believe that political philosophers and thinkers really ought to turn their minds to a philosophy of community and what its appropriate role is.

The liberals tend to argue for national governments based, I think, largely on their experience coming out of civil rights, where the whole of the south seemed to be intransigent. Now, here’s an interesting question: what would have happened in the South if they would have just let it go? Would it have changed anyway? I wonder what would have proceeded without the Justice Department stepping in? I’m not prepared to say that they should not have. But I question whether the experience of the semi-success of integration through imposition by the federal government ought to be a model for dealing with other issues facing the nation.

A much more creative approach would be to define what the human needs are that we want met and then find the quickest and cheapest and most benign way of meeting those needs, really meeting them, not just giving them lip service. Really solving the problems, but doing it without major government interference.

To get back to your question about the macro- effects, my hunch is they’re going to be pretty benign; I don’t think there will be massive changes. But there are massive changes coming in this country. The economy is shifting in ways that none of us understand. Personally I like the thinking of Paul Hawken about the shift from a mass economy to an information economy, not as in computers and such, but as in products that embody more information, smarter, more durable products. The breakdown of mass marketing, the success of targeted niche marketing, the success of small entrepreneurs. I keep wondering if this economy can put up with the strains it’s under. I’m really of two minds. The macro economy is remarkably durable, but at the same time, it is clearly damageable. There have been major disasters in national economies. It happened not too long ago in this country, and it’s happened many times over history. There are a lot of reasons why the present economy should come unglued.

Robert: There have been for at least 15 years.

Hunter: Yes, and it’s sort of pondered along, upping and downing but basically doing all right. But that whole possibility of a crash, a major dislocation for major chunks of the economy, is certainly very real and needs to be taken into consideration. In a crash, little economies have the potential to be more resilient but are also likely to get squashed. Most of the attention gets poured into the big urban areas (that tends to be where the available jobs are), and rural economy now is so dependent on export to the urban economy. It’s not at all the way it was in the ’30s. Farming is clearly coming apart at the seams, and the survivability of the rural economy is really in question, so I have no qualms about trying to strengthen rural economies.

We have taken some measures to not be overly self-reliant. Communities just plain aren’t going to start growing their own coffee and producing their own typewriters, peanut butter, shoes, etc. So any effect we’re going to have is going to be muted to start with. On the other hand, if all communities start growing their own broccoli, which is a very real possibility, California broccoli growers are going to take it in the shorts. Now you can argue that they ought to, that the ability of California to be the food basket of the nation came from cheap energy, cheap water, transport energy. It’s macro farming, with energy-driven chemicals and energy-driven machines, the subsidy to the interstate highway system, and then, of course, the subsidized water which all the rest of us are paying for. In a real economic world, that wouldn’t have happened anyway. As economics comes more into the picture, as people start pricing for sources closer to the real cost, that advantage to California will decline. With growing health consciousness, more people are growing their own food anyway. The Rodale folk think that the value of home produce is at least equal to the total value of California agricultural produce.

Robert: That’s part of the ethic of the market economy, that if you can do it better and somebody else loses out, well, that’s just the way it goes.

Hunter: Yep. I don’t feel at all bad about the impact we’ll have in that regard. I’d be very pleased if out of this grew an increased sense of community political self-reliance, so that folks started making more for themselves, considering what’s going on at a national level and how it affects them and what they can do about it. Getting more active. Americans have pretty much tended to abdicate political responsibility, and you’re considered political if you vote, which is really silly. But I think a lot of that is because people feel powerless. What good will it do if I get involved anyway? And maybe if they take on strengthening their own local economy and learn that they can do that, they’ll get more active in other ways. Now that would be super.

Robert: There are all sorts of potential positive macro effects.

Hunter: Some foundations up in Detroit were very worried about this little project, because they thought we were intending to have every community build its own pickup trucks. And we said "No." Out of that discussion came what’s sort of become the motto of the project: "A durable recovery on Wall Street has to start on Main Street." I hope it works.

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