What would make our City Economies more “Resilient”: Lessons from Fogo Island

We’ve all heard the speech by a politician where they talk about “resilience” or “emerging from crisis like a phoenix from the ashes”. But when it comes to city and regional economies, what does resilience actually mean beyond buzz phrases?

In addition to (attempting to) answer this question, this post will:

• Offer a definition of economic resilience that can be linked to local strategy
• Use the Fogo Island model championed by Zita Cobb and the Shorefast Foundation to the outline some of the ingredients of a resilient economy
• Reveal how the practices on this small, remote island in northern Newfoundland might also apply to larger metropolitan cities (or can they?)
• Conclude with some recommendations to get your city started down the path toward resilience

Picture by Richard Barnes for Bloomberg. You may not have heard of Shorefast Foundation, but you’ve most likely seen an image of their world-famous Fogo Island Inn; a business that contributes 1 out of every 3 dollars circulating on Fogo Island — a small remote island in northern Newfoundland. But the Inn itself is a part of a web of businesses, some not-for-profit and others part of the local supply chain, that offer a new way to understand local economies

Why am I writing about this? Through the efforts that economic development professionals like myself put into the COVID-19 pandemic recovery, we had a (hopefully collective) realization that “resilience” would need to be an embedded principle of economic development planning going forward. In parallel to this, a team here in the Victoria region of BC were fortunate to join a year-long pilot project (concluded in summer 2022) working directly with Zita Cobb and the Shorefast Foundation on Fogo Island to explore economic resilience and the ingredients needed to pursue it. This post contains some of my key take-aways and how they might apply elsewhere.

The Pilot

The Community Economies Pilot was initiated by Zita Cobb (Shorefast Foundation) and Mary Rowe (Canadian Urban Institute) and funded by the McConnell Foundation and the Community Foundations of Canada.

The intent was to examine four different local economies, including their governance structures, collaborative architectures, the roles that key actors play in each, and then share ideas about how local economies can respond to big challenges, like climate change and pandemics, but also how they can respond to globalization forces and implications such as reduced local control over our economy and, more importantly, how it benefits local residents.

The participating “prototype” communities:

• Prince Edward County, Ontario
• London, Ontario
• Greater Victoria, BC
• Hamilton, Ontario
• Fogo Island, Newfoundland

You can learn more about the pilot process here and read the final report on the project, released in September 2022, here.

Grounding us in “resiliency”?

To get us beyond the rhetoric, let’s first define resiliency, or more specifically economic resiliency. There are many definitions, mostly used at the national level. Here’s a whole page on the subject from the OECD.

At a local level, economic resiliency could be summarized as:

a community’s or city’s ability to prevent, withstand or recover from times of turmoil or uncertainty while still delivering a reasonable quality of life for its residents.

Let’s examine this definition:

1) “ability to withstand or recover” — implies that the community itself has inherent capacity, assets and resources that are responsible for or play a part in its ability to survive;

2) “times of turmoil or uncertainty” — refers to the cyclical nature of economies (boom/bust) but also other phenomena such as natural disasters, pandemics, and other external forces, most of which have uncertain ending points and uncertain outcomes;

3) “delivering quality of life” — points to the ultimate role of the local economy, which is to enable residents to increase or maintain their quality of life and that of future generations. If we (collective “we”) can remain relatively comfortable through times of turmoil, then we are resilient.

There’s obviously much more to resiliency than my simple definition here (and I’ll explore this in future posts). But for now, this definition sets us up to explore why Zita Cobb’s approach on Fogo Island is so profound and how we might learn from it in more populated places.

Why was resiliency so important to Fogo Island?

There are very few examples as clear as what Zita Cobb has done on Fogo Island to demonstrate this concept.

Zita created the Shorefast Foundation with her brothers as a way of giving back to her home community on Fogo Island. Zita’s father was a fisherman. Her family’s quality of life was much more linked to that morning’s catch than it was to a global economy and its forces, such as recessions or currency exchange values. Back then, their fishing village actually functioned without much use for money. It was built more on trading relationships and trust of one’s neighbour. This is how their community survived over many generations.

But then, like many resource towns throughout the world, outside forces showed up. In their case, in the form of commercial fisheries whose success was dictated by dollars and cents, and not by relationships to the local community. How could a resource industry made up of small, independent proprietors possibly compete with the large resources (and large fishing nets) of large corporations? And perhaps more importantly, a success metric driven by financial goals could simply deplete the fish stock and move on, which would leave a multigenerational fishing community in shambles. Well, that’s exactly what happened in the 1990’s. Zita states that her father “died of a broken heart”.

How could they possibly respond to this?

image: Zita Cobb appeared on this 2021 episode of CBS’s 60 Minutes

The CBS program 60 Minutes was also fascinated by this question. This story aired in late 2021 and it explains what Zita’s motivations were for going back to Fogo Island, after a very successful career as a technology executive, to create the Shorefast Foundation and the now world-famous Fogo Island Inn.

Fogo Island Inn — much more than a hotel

On the surface, this might seem like a story about a successful entrepreneur who moved back home to invest her riches into a hotel that created jobs for locals. End of story. But that’s not the full picture at all.

Fogo Island Inn represents a local economic development model that embeds local resilience into its core mission. To peel back the layers, one would find:

• Fogo Island Inn was designed using as much locally-sourced materials and supplies (and local storytelling) as possible. Even the architect is from a nearby community.
• Zita doesn’t even own Fogo Island Inn. It’s actually a non-profit, part of the holdings of the Shorefast Foundation — a registered charity.
• Shorefast reinvests profits from the Inn into local projects through investments in arts, artist in residence programs, heritage restorations, environmental stewardship, business incubation, and more. Here is the full list.

And, to top it off, Shorefast has embraced an unprecedented level of transparency that shows the consumer where every dollar is circulated in the economy (Side note: staying the Fogo Island Inn is a special experience and the price per night reflects that uniqueness. There are only 29 rooms by design).

The Fogo Island Inn uses a concept of economic nutrition to show patrons where their money goes

This example shows in real time how a healthy economy is supposed to work, or at least a small slice of it (using the Fogo Island Inn as the major wealth producer on the island).

This is assuming that we all know that the economy is really about human behaviour. The micro-economy being our “household” and the decisions we make (where we spend money) and how these connect to our community. The meso-economy (the relationship between the households, local businesses, local supplies and how the money flows via trade patterns and within the “commutershed”). And the macro-economy, or the economy outside of our immediate community (across the country and across international borders).

Lessons from Fogo Island: Summary

• Ownership and equity matter: Should the local Fishery or Cannery be owned by a private equity firm that siphons off profits back to Bay Street? Or should it be owned by the fishermen and community-members themselves?
• Data matters (beyond GDP): Should Fogo Island measure its economic success by how fast it grows in real monetary terms each year? Or should it measure economic success by the health and wellbeing of local households and how these levels can be sustained over time?
• Retention of more “dollars”: Should the Fogo Island Inn measure its own success by its financial performance (profits)? Or by its ability to spread that wealth around the community and impact more people and businesses around it?
• Inspiring the Next Generation: Should the success of a community be measured by how many young people graduate and move to the big city to become doctors and lawyers? Or, should we be building institutions that nurture opportunities where each generation can see themselves in the future of the community?

How can a metropolitan city apply these learnings to increase resilience?

You might be thinking “sure this works on a small island where everyone knows each other” or “it’s ridiculous to expect businesses to restructure as not-for-profits!”. I get that applying this model to larger places is not 100% transferable — at least not at the depth that Shorefast has been able to accomplish. And by the way, there’s nothing wrong with profit. Where it gets shady is if the local economy is being exploited in the name of short-term profit — especially in cases where a place is dependent on a scarce resource. That resource can either be exploited for short-term gain, or nurtured for long-term, multi-generational sustainability.

Consider the following statements. Then we’ll explore these using a diagram below.

• If a city or region can take meaningful actions toward improving its ability to withstand external shocks, then it is moving toward resilience. So for example, if we know that our levies are vulnerable to rising sea levels, then long-term, strategic investments to eliminate this vulnerability will make us more resilient (beyond the sheer devastation of a breach, imagine the economic fallout of a major flood)
• If a city or region can plan for uncertainty (rising sea levels are a tangible example, but what about pandemics or global recessions that are way less predictable?). By recognizing that there are certain attributes or characteristics of our city’s economy that can make it more resilient to these shocks, we can take deliberate actions that make us more resilient over time.
• If we realize that certain trends in cities (such as: growing wealth inequity, rising unaffordability, demographic/systemic labour shortages, healthcare systems under serious pressure) are strongly linked to our economic systems; we can begin to address them more strategically and thus moving us toward increased resilience.
• If the source of our city’s wealth comes from only a few key sectors, then diversifying our means of wealth creation would make us less vulnerable to downturns and thus more resilient (since not all sectors of the economy respond to externalities the same way or at the same time).
• If the source of wealth is flowing into the region from only one (or a few) external markets, then increasing the diversity of trade markets that we are involved in would make us less vulnerable to fluctuations in those markets and thus more resilience (since not all economies across the world go up and down at the same time).
• If a lot of our wealth is leaking outward due to excessive imports of easily replaceable goods or services, then replacing those imports with a local source would increase circulation of local wealth within the region (in economic development we call this the “multiplier”; the longer a dollar circulates within the local economy, the higher the economic multiplier or spin-off effect of that dollar. We can increase multipliers by reducing leakages).

Linking this to city economic systems

I created this diagram a while back to show how regional economies create, circulate and lose wealth and the role that different stakeholders play within the ecosystem (represented by the anchors, the large trees; the support organizations, the garden tools; small businesses, the flowers; and risky startups, the bonsai trees). The full explainer can be found in this previous post.

To understand this diagram above, it’s important to review the historic role that cities played in early civilizations. Cities emerged out of human need for commerce and exchange. Prior to fiat currency, resources and goods were brought in from the countryside and traded. Then with fiat currencies, goods were bought and sold in market systems. Cities were the facilitators of those transactions by creating economies of scale and supportive infrastructure. This also led to knowledge transfers, new innovations, increased trade diversification, as well as secondary (e.g., producers of wagon parts needed to transport goods around) and tertiary (e.g., restaurants and inns that served the traders while in the city) sectors.

Fast forward to today and it’s no different. Cities are still places that offer diverse economic opportunities. They are places that accelerate innovation, technological adoption, academic research, commercial spin-offs, company creation and all the activities that create meaningful jobs and create wealth through global trade linkages. This is the economic system in the 21st century — local places tied to the global economy.

In theory, there’s nothing wrong with this picture — globalization has brought many positives and has made humanity more comfortable overall (as demonstrated by the now famous TED talks by Swedish statistician Hans Rosling, like this one). However, over the last two decades, due to the ease of which finance and capital can flow across borders — for example, it flows into a jurisdiction in the form of a chain retail business like Walmart; and flows out of the jurisdiction in the form of profits that flow upwards to Walmart’s shareholders. There is clearly less local control over the economy and its ability to be “resilient”.

This is not a post against globalization (I do believe that humans are better off working together and that isolationism can be super harmful), but we do need to acknowledge the negative implications of globalization and how we can counteract them deliberately in order to achieve resilient local economies. This balance must be measured in outcomes such as reduced wealth inequality, lower poverty, sustainable resource management, increased institutional capacity at local levels to solve problems like homelessness or to respond to infrastructure needs and changes over time, and many other measures.

Bringing it home: Three Recommendation to Move Your Local Economy Toward Resiliency

Regional Self-Awareness

In his essay Resilient Economic Development: Challenges and Opportunities within the book Metropolitan Resilience in a Time of Economic Turmoil (2013), University of Southern California’s Raphael W. Bostic recommends gaining regional self-awareness is the first step toward increased resiliency. He argues that understanding strengths and weaknesses of your local economy is what will dictate the policy and programmatic interventions. This is in lock-step with Community Economies Pilot and one of the reasons why Zita insisted on using the Economic Nutrition report card for the Inn — it creates hyper-transparency: who owns what and where does the money flow? Get the data and analyze it together.

Architectures of Collaboration

Bostic’s next recommendation is to get the architectures of collaboration right through a “Coherent organizational structure” (p. 70). This is in recognition that economies function fluidly across jurisdictional boundaries (aka metropolitan regions), whereas most policy levers impact sub-regionally within city jurisdictions and not economic regions.

It also alludes to the fact that proper governance structures can involve both government and non-government actors such as academia, NGOs and even private-sector businesses. Governance structures must form connective tissue that brings parties together to explore the issues together and act together. These are sometimes referred to a “Triple Helix” governance models (government, academia and private-sector).

Zita refers to these structures as “the third pillar”, from the book by Raghuram Rajan (link). The other two pillars being “The State” (or the government) and “The Market” (or the natural trade forces). Rajan’s thesis is that “The Community” is the pillar with the most local control, but that it has been eroded over many years and needs to be brought back through institutional capacity and collaborative governance structures.

Strategize and Act

Once these two pieces are in motion (self-awareness and collaborative governance) then it’s time for strategies. Strategies that increase resilience are alluded to in my statements above. And there are LOTS of them.

Coming up with the right mix and the right intensity is really where each city/region needs to adapt their own approach. There is no cookie-cutter approach to economic resiliency, but having a strong, embedded “mission economy” driven by shared values, coordinated efforts and leveraged resources is key. Programs and policies that flow from these processes then need to be measured over time to show how the region is moving toward resilience over time.

In closing, as Bostic states “Effective resilient economic development requires, at a minimum, self-awareness, institutional coherence, and a broad base of allies and partners who have been creatively convened. A bit of good fortune will help, as well” (p. 76).

Let’s commit to increased economic resiliency in our neighbourhoods, cities and regions. As Zita and Fogo Island show us, it’s a win/win proposition.