Community Development And Entrepreneurship

Inuit Youth Council Seminar

By Professor Clarence S. Bayne, Director of the EIDMC and Director

of The Graduate Diploma in Administration JMSB, Concordia.

People The Basis of Community

• People have needs• Needs can be classified as utilitarian,

symbolic and hedonic. • Utilitarian: food, clothing, transportation,

shelter• Symbolic, hedonic: beliefs, norms, values,

feelings, spiritual and religious, sense of being and belonging, trust.

Individual and Community Needs

• Needs exist on an individual and a collective basis• The individual needs extend beyond the physical

and utilitarian everyday needs• The Individual has needs that are personal: food,

security, a personal “religion” of being• The Individual also has needs that are social and

requires a collective culture: family, belonging, community.

People and Communities

• People create communities• People live in communities• Communities are economic systems ,and • Social systems. • Economic systems satisfy mostly utilitarian or basic

needs• Social systems satisfy “higher order” needs• Economic and social systems are inter-dependent• Society is a product of both systems: social networks

and production oriented economic networks (economy)

The Economy

• The Economy can be represented as a system of transactions and relationships between its sub-sectors to produce the goods and services that individual and groups require to satisfy their wants.

• The sub-sectors may be classified as: households, firms and organizations, the market for trade in goods and services, the market for the productive factors, the public sector ( government, social agencies)

Types of Economies

• Capitalistic Free Enterprise Market Economy: minimum government government intervention. Maximum “free” market transaction(laissez faire).

• Command Economy: centrally controlled and directed. Underlying objective is equitable redistribution of wealth through government (or a central agency) intervention in the market system; and the reduction of private ownership of the means of production.

Flow Diagrams of an Economic System

• The household is central to the economy.• Everyone belongs to an economy and neighbourhoods

that make up the geographical community. • Households own the Capital(savings invested), the

Land, their labour, and knowledge(“entrepreneurship”)• Thus household receive interest payments, rent for the

use of the land, wages and salaries, net profits.• Some households may receive a larger share of the

GNP than others.

Social Networks

• Households other than being involved in economic transactions and activities develop social networks of human beings that create environments of law, order, trust and belonging, fraternity, responsibility, common values and norms, traditions, spiritualism .

• Households create and are responsible for sustaining living decision-making communities

The Pillars of Community

Three essentials of economic development:• Economic activity: The initiatives and activities

that individuals and agencies engage in to produce goods and services in response to needs

• Human Action:leadership, problem identification, organization, priorization and choice, act, solution, evaluation

• Social Action: determining and acting to create a type of society based on certain beliefs, values, and sense of humanity.

Economic Development• Economic development is the set of outcomes

resulting from the application of human skills and creative action to productive resources in the form of materials, equipment, space(land and natural resources), within the framework of a society(families bound together by a complex set of relationships, traditions, customs, mores, values) and within some geographic space.

• Economic development may differ from economic growth in the sense that the problem of the distribution of wealth is central to models of economic development much more than in economic growth models

Community Economic Development

Community economic development takes

place when the community, as opposed to

private individuals, takes proprietorship of

resources and involves the citizens in the

decisions about the use of those resources for

the benefit of the community.

Two Types of Community

• A community of Interests

• Community of Place

Definition of Community

• A community may be defined as a group of residents in a specific geographic location acting on a common interest, That is to say a “community of place”, or

• A group sharing a common interest that is not necessarily associated with a particular geographic region. That is to say a “community of interest”

Characteristics of a community

• Place: physical space characteristics and geography

• A network of relationships:

i. Economics and demographics

ii. Social: religion, festivals, arts, cultural events, fishing, hunting, customs and traditions, etc

Characteristics of Community of Place

• What are the characteristics of a community of place?

• Where do your people live and how do

these regional or local habits distinguish those people from others within the national boundaries?

Characteristics of Communities of Common Interest

• Name some characteristics of the territory you live in that could be used to define a community as one of interest as opposed to a community of place.

• How do these communities differ from the communities of place that you described earlier?

United Nations Definition

Community Development:

a holistic process through which the initiatives of Government are united with the people to improve social cohesion in their communities(i.e., social, cultural and economic conditions).

The Process of Community Development

• The process of community development can be as important as as its product.

• Some people argue or implicitly suggest that the goal of community development is increasing public participation no matter whether the outcomes are successful or not. I reject this as being inconsistent with the psychology of motivation; and as tending to generate activities that lead to the misallocation of scarce human resources: a meaningless series of meetings that have no clear outcomes.

• I will advocate a model of the process borrowed from Gary Green and Anna Haines (Asset Building Community Development).

A Community development Process Model

Implementation And

Evaluation

Community organizing

Visioning

Planning

Create Benchmarks

and Indicators

Do ProjectsA Vision Statement

New Policies

New Organizations

New Organizations?

Create an action plan to the simplest to a comprehensive plan at the most ambitious

Opportunity for Engagement

• There are many opportunities for government agencies to engage in community development with local community organizations

• Provision of financial resources or assistance in gaining such resources

• Assistance in improving governance and management skills

• Capacity Development. Create partnerships in which the local community leadership and management is empowered, there is transferability of continuous learning capabilities to the community; and there is a transformation in thinking and attitudes.

Participation

• How is a community motivated to effect change?

• How does a community maintain momentum?

• Who in the community should get involved?

Types of Public Participation

• Public action

• Public involvement

• Electoral participation

• Obligatory participation

The Sherry Arnstein Ladder of Public Participation

The ladder Citizen control

Delegated power

Partnership

Placation

Consultation

Informing

Therapy

Manipulation

Degrees of Tokenism

Degrees of Citizen Power

Non-participatory

Techniques for motivating Public Participation

Maintaining Public Participation Momentum

• Public participation is difficult to maintain• It increases the complexity of decision

making for the CBO • Reaction time is slowed, a disadvantage

when the organization needs to act quickly to take advantage of funding deadlines.

• The demand for funding and reporting require a professional staff.

Models of Community Practice

• Social Action

• Social Planning

• Community Development

Organizing• For organizing to begin, it is sufficient for one

person to find one thing that he/she wants to change. • Organizing is a way of mobilizing people to work

together to solve problems.• Organizing involves the principles of project

management: it involves the effective use of time, resources, people, processes,to achieve socially desired outcomes.

• Organizing has various forms but the form of specific interest to us is neighbourhood or community organizing

• The end purpose is problem solving

Social Action Model• A group/community that finds itself low on the

index of social cohesion in the society takes action to correct the situation

• Makes demands on the larger community or government for better treatment, improved services, or basic changes in major institutions

• Seek redistribution of power, resources,and decision making authority

• Depends on radical interventions to redress inequalities

• Leaders are activists

Social Planning

• Uses a technical and strategic approach to solving community problems.

• Makes the assumption that the complexity of the urban environments where the majority of the cultural communities live require social scientists to identify the problems and professional planners and technicians to solve the problems.

• Building community capacity or fostering change is not central to this model

Community Development• Presumes that community change can be pursued through a

model of public participation.• People are mobilized to be involved as partners with

government in all the stages of policy making, to identify, plan and find solutions for social and economic problems and issues facing the community. Example: Montreal Summit 2003.

• The model assumes vigilence on the part of the citizen and community based organizations.

• The model does not reject outside expert advice, but sees it as an input to be used or rejected by the community rather than as a final solution.

• Model embodies the principles of democracy, a spirit of voluntarism, planning, quality management, and continuous learning by citizens and community based organizations.

Various Definitions of Community Development

• Local economic development

• Political empowerment

• Integrated service provision

• Housing programs

• Comprehensive planning

• Job-training programs

Community Development: objectives

•Solving local/regional problems

•Addressing inequalities of wealth and power: the redistribution problem

•Promoting a philosophy of nation building and society: such as harmonious diversity; democratic values and practices

• Search for social cohesion: capacity building, improving the potential of individual residents

•Building a sense of trust, belonging and community

Community Development: Asset Building Approach

• Community capacity building is a planned effort to build assets that increase the capacity of residents to improve their quality of life.

• Asset building approach is a shift away from the needs assessment approach

• Assets are defined as the gifts, skills, and capacities of individuals, associations and institutions within the community

• The asset approach is a place-based approach• Asset mapping an important stage in the process

Definition of Community Assets

• Physical• Human• Social• Financial• Environmental

Exercise: List components of the physical ,

human, social and environmental aspects of your

community

Capacity Development:Opportunity for Engagement

• Capacity Development. Create partnerships in which the local community leadership and management is empowered, there is transferability of continuous learning capabilities to the community; and there is a transformation in thinking and attitudes.

• Visioning process an important part of the capacity building process if it is at the upper round of the Sherry Arnstein Ladder of public participation

Visioning Process• Coordinating committee meets to plan first workshop

• Community visioning workshop meets. Committee researches, brainstorms, and develops initial vision statement to facilitate discussion

• Establish a set of taskforces or regional and sector committees to organize community workshops for discussion and feedback. Key topic areas are set out for discussion, modification, deletion, addition, by broad cross section of community representatives

• Community visioning workshops convene, collect and document feedback

• Each taskforce organizes the feed back and prepares reports and summaries. Research teams collect and analyze data to prepare strategies and feasible action plans.

Visioning Process (Continued)

• Policies and strategic plan derived from the vision and policy propositions must conform to resource capacities.

• More community workshops are convened for revision and further feed back on the latest version of plan

• Action plan prepared by each task force on the basis of vision statement and community revisions. This is then organized into a final report.

• Final workshops may be called for review and buy in and approval by key stakeholders: Government agencies, business, and community partners. The final plan includes who is responsible for what, assigns budgets, indicates partners, etc

• Monitoring and Evaluation mechanisms should be part of final plan

Community Development• Presumes that community change can be pursued through a

model of public participation.• People are mobilized to be involved as partners with

government in all the stages of policy making, to identify, plan and find solutions for social and economic problems and issues facing the community. Example: Montreal Summit 2003.

• The model assumes vigilence on the part of the citizen and community based organizations.

• The model does not reject outside expert advice, but sees it as an input to be used or rejected by the community rather than as a final solution.

• Model embodies the principles of democracy, a spirit of voluntarism, planning, quality management, and continuous learning by citizens and community based organizations.

Various Definitions of Community Development

• Local economic development

• Political empowerment

• Integrated service provision

• Housing programs

• Comprehensive planning

• Job-training programs

Community Development: Asset Building Approach

• Community capacity building is a planned effort to build assets that increase the capacity of residents to improve their quality of life.

• Asset building approach is a shift away from the needs assessment approach

• Assets are defined to include the gifts, skills, and capacities of individuals, associations and institutions within the community

• The asset approach is a place-based approach• Asset mapping an important stage in the process

Capacity Development

• Capacity development is not just human resource development or individual capacity development.

• Capacity building is a larger concept. It refers not merely to the acquisition of skills, but also to the capability to use them.

• This in turn is not only about employment structures, but also about social capital and the different reasons why people start engaging in civic action.

• Reference:Capacity For Development: New Solutions To Old Problems by S. Fukuda-Parr et al, see http:// planetexport.fr

Definition of Social Capital

• Social relations and networks serve as a form of capital

• These social resources require investment in time and energy, with the anticipation that individuals can tap into these resources when necessary

• Social relations are considered capital because they can be productive and improve the well being of residents

Two Forms of Social Capital

• Bonding capital: bringing people together who already know each other to strengthen the relationship that already exist.This could lead to fragmentation in the community.

• Bridging Capital: brings people together or groups that did not previously know each other. The goal is to create new social ties.

Services of Social Capital

• Emotional Support: advice, support, good neighbourliness, and friendship.

• Instrumental support: material aid and services, information and new social contacts. Like, babysitting, getting rides from others, lending money. Many of these services are carried out by churches, community associations,

Three Levels of capacity Development

• Individual: Enables the individual to embark on a continuous process of learning-building on existing knowledge and skills and extending these in new directions.

• Institutional: This too involves building on existing capacities. Do not duplicate initiates unnecessarily. Improving the quality of neighbourhood organizations.

• Societal: This involves capacity in the society as a whole.or transformation for development: creating the kind of opportunity in the public or private sector , that enables people to use and expand their capacities to the fullest. This will also depend on the social capital stock;sense of identity, belonging, togetherness, ownership, and the nature of the interactions between Citizens and local governments.

• All these layers of capacity are mutually interdependent. If one or the other is pursued on its own, development becomes skewed and inefficient.

Reference: S. Fukuda- Parr et al

CED INUIT DAY 2

Economics and the Community

Definition of Economics

Economics is the science of how men/women choose with or without the use of money to employ productive resources (land, labour,capital goods as machinery, and technology)To produce various commodities (wheat,coats, skidoos, roads, boats, health care services, etc)over time and to distribute them for consumptionnow and in the future, among various individuals

andsociety.

Economic Effort

• The purpose of all economic effort is the satisfaction of wants• People have wants• Many goods are necessary to satisfy these wants• Many goods are scarce, the reason being that their

existence depends on resources that are themselves scarce

• People’s/societies wants create opportunity for entrepreneurial action.

The Economic Way of Thinking

• All economic problems arise from scarcity, and scarcity forces people to make choices and evaluate opportunity cost.

• Opportunity cost is the best alternative forgone, not the money cost, and includes time cost and external cost.

• Decisions are made by comparing marginal benefit and marginal cost.

• When the opportunity cost of an activity increases, the incentive to substitute an alternative activity increases.

• Market competition facilitates the search for alternatives or substitutes. Its effect is beneficial to the consumer and to society.

DemandThe quantity demanded of a good is the amount consumers plan to buy at a particular price during a given time period.

The Law of DemandThe law of demand states: “Other things remaining the same(ceteris paribus), the higher the price of a good, the smaller is the quantity demanded”:

An price results in a quantity demanded for two reasons: the price

substitution, and price induced income effect

Change in the Quantity Demanded• A change in price(P0 to P1) causes movement

along the demand curve. This is called a change in quantity demanded

(Q1-Q0 ). The higher the price of a good, the less is the quantity demanded:Q1 < Q0

P1

P0

Q1 Qo

Change in Demand

• A shift of the demand curves is called a change in demand. The demand curve shifts as a result of changes in:– Prices of related goods.– Income.– Expected future prices.– Population.– Consumer Preferences.

Right and Left Shifts in Demand

• Increase in demand shown as

+(Q1-Q0):demand curve shifts right

• Decrease in demand shown as

-(Q1-Q0):demand curve shifts left

Q0 Q1

P

SupplyThe quantity supplied of a good is the amount producers plan to sell at a particular price during a given time period.

The Law of Supply

The law of supply states: “Other things remaining the same(ceteris paribus), the higher the price of a good, the greater is the quantity supplied.”

p1

Q

p0

Q0 Q1

Opportunity Costs and Changes in Prices

Because opportunity costs of factors increase with increases in quantity produced, producers require an the price of the good to make them willing to quantity supplied.

The Supply Curve• The supply curve represents the

positive relationship between quantity supplied and price,

(ceteris paribus ).• A change in price causes movement along

the supply curve. This is called a change in quantity supplied. The higher the price of a good, the greater is the quantity supplied.

A Change in Supply

• A shift of the supply curve is called a change in supply.

• The supply curve shifts as a result of changes in: – Prices of factors of production.– Prices of other intermediate goods produced.– Expected future prices.– Number of suppliers.– Technology.

Shifts vs Changes in Supply

• Increase in supply supply curve shifts right.

• Decrease in supply supply curve shifts left.

Q0

S1

S0

S2Price

Price DeterminationThe equilibrium price is where the demand and supply curves intersect, where quantity demanded by consumers equals quantity that suppliers are willing to supply at the price consumers are willing to pay.

Equilibrium

• Only at equilibrium is there no tendency for the price to change. The equilibrium quantity is the quantity Qe bought and sold at the equilibrium price, Pe

Pe

Qe

S

D

Supply Surplus

• At Price P2 above the equilibrium price pe, there is a surplus (quantity supplied Q2 - Q1). since price P2 > Pe the market is in dis-equilibrium. If there is no shift in the demand, the surplus supply will cause prices to be reduced until equilibrium is re-established at Pe and Qe

S

D

Q1 Qe Q2

P2

Pe

Demand Surplus

• Below the Equilibrium price there is a demand surplus

• (quantity demanded > quantity supplied), and price is below equilibrium price.

• Illustrate this case using supply and demand curves.

Production

• Production converts factors of production into goods and services

• Inputs Goods, services

Inputs are: Land, entrepreneurial ability, labour,

capital, including human capital- skill and

knowledge arising from education and training

Technology

Production Possibility Frontier

Fishing

Carving

Attainable Area

Unattainable Area

Economic Growth: an Outward Shift of the PPF

Fishing

Carving

Savings as Opportunity Cost• The rate at which capital stock increases is dependent

on the rate of saving the community does: assuming Saving =Investment

• The opportunity cost of increasing the supply of goods and services in the future is the amount of consumption that the community gives up today(i.e., the rate of saving)

• The underlying assumption is that what(portion of total goods produced) is not consumed is saved and invested in productive capacity in the Community (Savings =Investment in the community). There is no leakage of savings to places outside the local community.

Aggregate Demand• Aggregate demand( in a closed community) is the

total expenditures on goods and services as indicated by the sum of all individual household demand curves plus the total expenditure of the producing firms and organizations on capital inputs(or productive capacity or investment goals).

• Essentially, in a closed community, aggregate demand = demand for consumer goods(C) plus the demand for investment goods (I). Aggregate Demand = C + I = Total expenditure on all goods and services produced.

Personal Disposable Income

• It is the gross income earned from all sources less taxes, savings, and other leakages; that is

• Personal Income –Taxes –Savings = Personal Disposable income .

• If part of Disposable income is spent outside the region, and some domestic savings are also spent outside the region, and if government spends some of its tax revenues outside the region then total expenditure on goods and services will be less than that desired to sustain economic growth within the community or region.

Aggregate Demand and Expenditures in an Open Self-sufficient Community

• Y(Total Income) =Total Expenditure on Final Goods and Services = I + C + G + E

• I = Investments

• C= Consumption

• G= Government Expenditure

• E= Exports

The Paradox of Thrift

• An attempt to save, when it is not matched with an equal willingness to invest, will cause a gap in demand. This means that businessmen will not be getting back enough money to cover their costs. However, production will be curtailed or costs will be slashed, with the result that incomes will fall. As incomes fall, savings will also fall because the ability to save will be reduced.

Full Employment and Aggregate Demand

• For a given technology, a certain amount of labour (amount of labour per unit of output) combined with a certain amount capital (amount of capital per unit output) is needed to produce a unit of output.

• These ratios are called technical coefficients of production

Employment Multiplier

• Khan’s Multiplier: employment in one industry/activity has a multiplier ripple effect through out the community

• A 1000 additional units of labour employed in public works(and including the materials used), say road construction generates new income

• Creates employment(say 2000 secondary employment) in the consumer goods industries through increased consumption.Thus total employment would increase by 3000, a multiplier of three(3).

Leakage and Income Multiplier• The re-employment process peters out because of

leakages• Part of the increment of income is used to pay off

debts• Part saved in the form of idle bank deposits• Part invested in securities purchased from others who

in turn fail to spend the proceeds• Part spent on imports, which does not help home

employment• Part of the purchases is supplied from excess stocks of

consumer goods, which may not be replaced.

Summary of Leakage and Multiplier

• Leakages constitute losses to the income stream.

• If the sum total of all leakages from a change in real income is

(ΔY/Y)*100 = 20% then we say that the propensity to consume is 1- 0.20 = 0.80

• The multiplier effect is given as 1/(1-.80) = 5

The Multiplier Case

c2 c3 c4

C+I

C = Y

Time

c1

c1 + c2 + c3 +… = sequence

of induced consumption expenditure

I0 =( shaded area)

Aggregate Demand and Say’s vs Keynes

Say’s Law and Economic Growth• Say’s Law states: “supply creates its own demand”• This assumes that in the free market system prices

adjust to accommodate a growing population and induce increases in capital

• That new firms and new workers, add to the productive process not by supplanting others, but by offering their own products in exchange

• Keynes and others show that the price system does not necessarily behave this way or guarantee an increase in capital stock/new capacity which depends on exogenous market factors: entrepreneurial action, innovation and the opportunity for new creation.

Keynes’ Model of Economic Growth• Aggregate Demand = Expenditures on Consumption +

Investment goods and services (C+I)• For equilibrium total real income(Y)- payments to

factors of production- must equal C+I, that is total expenditure on all goods: alternatively Y =C+I

• C = C(Y), aggregate consumption of household, does not grow fast enough to cover the cost (Z or GDP)of supplying aggregate demand(Y=C+I)

• There is a gap (Y-C(Y))which may or may not be covered by realized Investment (I) depending on the strength of non- market factors (technology, entrepreneurship and population growth) that normally determine the volume of investment outlays.

Keynesian Model of Income and Employment

Y=C+I

Y=F(Y)

C+I, Z

Y (real income/output)

Y= C+I

C

Yf

Y= I+F(Y)

C

I

Entrepreneurship and Economic Growth

• The nature of the gap between aggregate demand and consumption suggests an entrepreneurial approach to creating new investment and capacity to sustain growth and development.

• The evidence supports the position that entrepreneurship is necessity and opportunity based, and that growth is correlated with the intensity of entrepreneurial activity. (Paul D Reynolds, Summer Institute, Jena-Germany,

25 June 2004)