Community economic development

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Community economic development (CED) is a field of study that actively elicits community involvement when working with government, and private sectors to build strong communities, industries, and markets.[1]

Community economic development encourages using local resources in a way that enhances economic opportunities while improving social conditions in a sustainable way. Often CED initiatives are implemented to overcome crises, and increase opportunities for communities who are disadvantaged. An aspect of “localizing economics,” CED is a community-centered process that blends social and economic development to foster the economic, social, ecological and cultural well-being of communities. For example, neighborhood business organizations target growth in specific commercial areas by lobbying government authorities for special tax rates and real estate developments.[2]

Community economic development is an alternative to conventional economic development. Its central tenet is that: “... problems facing communities—unemployment, poverty, job loss, environmental degradation and loss of community control—need to be addressed in a holistic and participatory way.” [3]


Economic development has existed even at a basic level since the earliest recorded communities. However, in the US and several other countries, the concept of Community economic development emerged "in response to tenacious poverty and the need for affordable housing, good jobs, affordable health care and quality of life matters needed for human existence",[4]

CED in the US

In the late 19th century reformers discovered less than desirable areas of the country where communities were overcrowded, unhealthy, poor and centered near factories, docks and various other places of employment. In the early twentieth century during the Progressive Era reformers began making connections between the condition of communities and "social ills" such as crime and poverty and ways to improve upon them.[5] The Progressive agenda of political, social, and physical reform swept the nation and led to comprehensive antipoverty strategies, embodied by New Deal programs and other grants in the 1930s. Policies during this time were top-down and citizens being affected had very little input to the changes being made. Once communities began to be revitalized, segregation policy followed to determine who was allowed to live where. Housing policy and real estate practices stifled upward mobility for non-whites and their communities developed with unique characteristics and problems as a result. These actions shaped communities until the 1960s, when President LBJ signed into law many anti-discriminatory laws such as the Civil Rights Act of 1964 and also declared a war on poverty which brought renewal and upward mobility for many people. More loan programs, grants and fair housing policies were implemented throughout the 60's and 70's but still failed to be non-discriminatory on the basis of race in some cases thus shaping communities in a particular fashion. Social investment gained momentum once again in the 80's and 90's bringing change to communities across America. Municipal governments become more representative of the communities they serve and the public is more involved and can interact with bureaucracies and elected officials with greater ease. Many initiatives existed at this time to renew inner cities and rural areas while also tackling social issues such as eradicating drugs and improving education. The modern day CED movement is focused on renewing urban and rural communities. Social justice is a key component to policy and conversation about changes to be made. Citizens are engaged with bureaucracies and their elected officials through a variety of mediums such as social media. Input from the people has gained more value due to increased demands for transparency.

Theories and strategies[edit]

The most significant aspect of community economic development, aside from the fact that it focuses on economic development in specific localities, is that focuses on the process of community building. This “community” aspect of CED assumes that the community will play a dynamic role in economic development processes and that community development will contribute to sustained economic development and vice versa. In this understanding, the community is considered both as an input and output in this CED equation.[6]

Looking at CED from an economic viewpoint, the initial purpose of such an approach is the creation of local jobs and the stimulation of business activity. Integrally linked to these purposes are strategies to increase access to capital, stimulate asset building, improve the general business climate, and link citywide economic development efforts to specific community development efforts.[6]

Increasing access to capital is an extremely important strategy for community economic development. Historically, residents in poor neighborhoods have experienced great difficulty finding access to capital because they are traditionally viewed as credit risks. In places where banks do offer services, these residents face other structural barriers such as minimum deposit requirements, high service fees, and complex paperwork. To solve these problems, a community economic development approach would develop alternate neighborhood community development financial institutions such as community development credit unions, community development banks, and community development venture capital funds.[6]

Improving the general business climate is also integral to community economic development. Strategies to do so would include improving the infrastructure and physical appearance of commercial areas, the quality of quantity of residential housing, and the transportation systems in a neighborhood. While these may not directly economic activities, they serve to strengthen the economic well being of an area because it encourages businesses to locate there.[6]

Objectives and goals[edit]

Community economic development exists in all developed countries but varies in the way it functions with the different systems of governments around the world. Research makes it apparent that there are common goals and objectives such as economic activities and programs that develop low-income communities.[5] Community Development Corporations, reformers and other agencies have other common initiatives including services to fight homelessness, lack of jobs, drug abuse, violence and crime as well as quality medical and childcare and home ownership opportunities while also bringing economic prosperity.[5] Another increasingly common objective is to preserve the character of communities and strong support for local business.


In the US, Community Economic Development projects are often funded by commercial banks within the structure of the Community Reinvestment Act. This Act of Congress took effect in November, 1978. It is administered by banks and other financial institutions and has been instrumental in helping the owners of smaller businesses navigate the steps of obtaining loans for development projects. A bank will operate a separate division within their loan department that focuses its expertise on small business services, as well as training and education. Because projects brought to CRA bank departments are often from areas of lower economic standing and/or unproven consumer markets, they are a larger risk to lenders. This heavier risk brings more stringent underwriting guidelines, in addition to often rigid government requirements. Many financial institutions state that these rules are cumbersome and difficult to comply with.


  1. ^ Ron Schaffer, Steven C. Deller, David W. Marcouiller. Community Economics: linking theory and practice. Iowa State University Press. 2004. Retrieved January 15, 2011. 
  2. ^ DeFilippis, James (2012). The Community Development Reader. Routledge. ISBN 978-0415507769. 
  3. ^ "What is CED?". Canadian Community Economic Development Network. Retrieved April 26, 2010. 
  4. ^ "Off Campus Database Authentication". Retrieved 2015-11-23. 
  5. ^ a b c "Investing In What Works for America's Communities  » The Past, Present, and Future of Community Development in the United States". Retrieved 2015-11-23. 
  6. ^ a b c d Fulbright-Anderson, edited by Karen; Auspos, Patricia (2006). Community change : theories, practice, and evidence. Washington, D.C.: Aspen Institute Roundtable on Community Change. ISBN 0-89843-444-0. 

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