domain operations Commons: 4/5

Foundational Economy

Also known as:

1. Overview

The Foundational Economy is a socio-economic concept that emphasizes the importance of the basic goods and services essential for everyday life. It provides a framework for understanding and improving the parts of the economy that provide universal necessities such as housing, food, health, education, and utilities. The core problem it addresses is the tendency of mainstream economic policy to focus on the competitive, traded sectors of the economy, often neglecting the foundational sectors that are crucial for the well-being of citizens. The value created by the foundational economy is a more resilient and equitable society where everyone has access to the essentials for a good life. The concept originated from a collective of researchers, primarily in the UK and Europe, who sought to reframe economic development away from a singular focus on GDP growth. The term was first introduced in the Foundational Economy Manifesto in 2013, which drew on the work of the French historian Fernand Braudel to propose a zonal model of the economy.

2. Core Principles

Zonal View of the Economy: Foundational thinking rejects the idea of a single, monolithic economy. Instead, it proposes a model of distinct economic zones, each with its own logic and purpose. These zones include the core economy (unpaid work), the foundational economy (essential services), the overlooked economy (discretionary spending), and the export-oriented market economy. This zonal view allows for a more nuanced understanding of economic activity and a greater appreciation for the importance of the foundational sectors.
Focus on Social Provisioning: The foundational economy prioritizes the collective provision of essential goods and services over individual consumption. It recognizes that access to basics like healthcare, education, and housing is a precondition for a good life and active citizenship. This principle challenges the neoliberal emphasis on market-based solutions and advocates for a stronger role for the public and social sectors in ensuring universal access to essential services.
Social Licensing for Private Providers: When private companies are involved in delivering foundational services, they should operate under a “social license.” This means they are obligated to meet specific social and environmental standards, such as affordability, quality, and community benefit. Social licensing ensures that private actors contribute to the public good and are accountable to the communities they serve.
Pragmatism and Place-Based Solutions: Foundational thinking is not a one-size-fits-all ideology. It emphasizes the importance of context-specific solutions that are tailored to the unique needs and circumstances of different places. This pragmatic approach encourages experimentation and learning from local experiences, rather than imposing top-down solutions.
Wellbeing as the Ultimate Goal: The ultimate aim of the foundational economy is to enhance the wellbeing of all citizens. This goes beyond narrow economic indicators like GDP and encompasses a broader range of social and environmental factors. By focusing on the essentials of a good life, the foundational economy seeks to create a more just, sustainable, and resilient society.

3. Key Practices

Mapping and Analysis: The first step in strengthening the foundational economy is to understand its composition and dynamics in a specific place. This involves mapping the key sectors, providers, and employment patterns of the foundational economy. For example, a municipality might conduct a study to identify the main providers of childcare, food, and housing in its area, and to assess their accessibility and affordability for different groups of citizens.
Promoting Diverse Ownership Models: The foundational economy thrives on a variety of ownership models that are rooted in the community and prioritize social and environmental goals. This includes supporting cooperatives, mutuals, community-owned enterprises, and public ownership. For instance, a community might establish a food cooperative to provide healthy and affordable food to its residents, or a municipality might create a public energy company to provide renewable energy to its citizens.
Community Wealth Building: This practice focuses on building and retaining wealth within local communities. It involves strategies such as local procurement, where public institutions prioritize buying goods and services from local businesses, and supporting the growth of locally-owned enterprises. The “Preston Model” in the UK is a well-known example of community wealth building, where a group of public institutions have redirected millions of pounds of their spending to local suppliers.
Socializing Finance: The foundational economy requires financial institutions that are committed to its long-term development. This involves creating and supporting community banks, credit unions, and public investment funds that provide patient and affordable capital to foundational businesses and projects. For example, a regional government might establish a public investment bank to finance the development of social housing and renewable energy projects.
Reclaiming Public Services: In many places, essential services have been privatized, often leading to a decline in quality and an increase in costs. A key practice of the foundational economy is to bring these services back under public or community control. This can involve re-municipalizing services like water and energy, or insourcing services that have been outsourced to private contractors.
Investing in Social Infrastructure: The foundational economy depends on a strong social infrastructure, which includes things like community centers, libraries, parks, and public transportation. Investing in and improving this infrastructure is crucial for creating vibrant and resilient communities. For example, a city might invest in building new parks and community gardens to improve the health and well-being of its residents.
Developing Foundational Skills: The foundational economy requires a skilled workforce. This involves developing and supporting education and training programs that provide people with the skills needed to work in foundational sectors such as care, construction, and food production. For example, a local college might partner with a construction company to offer an apprenticeship program in green building techniques.
Citizen Participation and Co-production: The foundational economy is most effective when it is planned and managed with the active participation of citizens. This involves creating opportunities for citizens to co-design and co-produce the services they use. For example, a housing association might involve its tenants in the design of new housing projects, or a city might use a participatory budgeting process to decide how to spend public funds.

4. Application Context

Best Used For:

Post-Industrial and Unevenly Developed Regions: The foundational economy approach is particularly well-suited for regions that have experienced de-industrialization and are seeking new, more resilient models of economic development. It provides a framework for revitalizing local economies by focusing on essential services and community needs.
Community-Led Development Initiatives: It is an ideal framework for community-based organizations, social enterprises, and local governments that want to build more equitable and sustainable local economies from the ground up.
Public Service Reform: The foundational economy offers a powerful critique of privatization and outsourcing, and provides a roadmap for reclaiming and improving public services. It is particularly relevant for campaigns to re-municipalize services like water, energy, and public transport.
Sustainable and Just Transitions: The foundational economy is a key component of a just transition to a low-carbon economy. By focusing on essential services and local supply chains, it can help to create green jobs and build more resilient communities.
Addressing Social and Economic Inequality: The foundational economy’s focus on universal access to essential services makes it a powerful tool for tackling poverty and inequality. It provides a framework for ensuring that everyone has the resources they need to live a good life.

Not Suitable For:

Export-Oriented Growth Models: The foundational economy is not a good fit for economies that are primarily focused on competing in global markets. Its emphasis on local needs and social value is at odds with the logic of export-led growth.
Financialized and Extractive Economies: The foundational economy is a direct challenge to economic models that are based on financial speculation and the extraction of value from communities and the environment. It is not compatible with a business-as-usual approach to capitalism.

Scale:

The foundational economy can be applied at multiple scales, from the individual and household level to the community, city, regional, national, and even international levels. While much of the focus is on place-based, local and regional initiatives, the principles of the foundational economy can also inform national policy and international cooperation.

Domains:

The foundational economy is relevant to a wide range of domains, including:

Health and Social Care: Providing quality, accessible, and affordable care for all.
Education: Ensuring that everyone has access to lifelong learning opportunities.
Housing: Providing safe, secure, and affordable housing for all.
Food: Building local and regional food systems that are healthy, sustainable, and equitable.
Energy: Transitioning to renewable energy systems that are owned and controlled by communities.
Water and Waste: Managing these essential resources in a sustainable and equitable way.
Transportation: Creating public and active transportation systems that are accessible and affordable for all.
Digital Connectivity: Ensuring that everyone has access to the internet and the skills to use it.
Arts, Culture, and Recreation: Recognizing the importance of these sectors for community well-being.

5. Implementation

Prerequisites:

A Shift in Mindset: Implementing the foundational economy requires a fundamental shift in thinking, moving away from a singular focus on economic growth and towards a more holistic understanding of well-being. This involves recognizing the intrinsic value of essential services and the limitations of market-based solutions.
Political Will and Leadership: Strong political commitment is essential to challenge the status quo and to create a supportive policy environment for the foundational economy. This includes a willingness to experiment with new models of ownership and governance, and to stand up to vested interests.
Engaged and Empowered Communities: The foundational economy is a bottom-up approach that requires the active participation of citizens and communities. This involves creating opportunities for people to co-design and co-produce the services they use, and to hold providers accountable.

Getting Started:

Foundational Economy Analysis: The first step is to conduct a thorough analysis of the foundational economy in a specific place. This involves mapping the key sectors, providers, and employment patterns, and identifying areas of strength and weakness.
Build a Broad-Based Coalition: Building a broad-based coalition of support is crucial for the long-term success of the foundational economy. This includes bringing together community organizations, trade unions, businesses, and public sector institutions.
Develop a Shared Vision and Strategy: Based on the analysis and the input of the coalition, develop a shared vision and strategy for the foundational economy. This should include clear goals, targets, and actions.
Pilot and Scale Up Initiatives: Start with small-scale pilot projects to test new ideas and approaches. Once these have been proven to be successful, they can be scaled up and replicated.
Monitor and Evaluate Progress: It is important to monitor and evaluate the progress of foundational economy initiatives to learn from experience and to make adjustments as needed. This should involve a mix of quantitative and qualitative indicators that capture the social, economic, and environmental impacts.

Common Challenges:

Overcoming Neoliberal Ideology: The foundational economy challenges the dominant neoliberal ideology, which can make it difficult to gain political and public support.
Lack of Resources and Capacity: Local governments and community organizations may lack the resources and capacity to implement foundational economy strategies.
The Power of Incumbent Firms: Large, private firms often dominate foundational sectors, making it difficult for smaller, community-based providers to compete.
Measuring Success: The success of the foundational economy cannot be measured by traditional economic indicators such as GDP. New metrics are needed to capture its social and environmental benefits.

Success Factors:

Strong and Visionary Leadership: The successful implementation of the foundational economy requires strong and visionary leadership at all levels.
A Long-Term Commitment: The foundational economy is a long-term project that requires patience and persistence.
A Culture of Collaboration and Learning: A culture of collaboration and learning is essential for the success of the foundational economy. This involves sharing best practices, learning from mistakes, and adapting to changing circumstances.
A Supportive Policy and Regulatory Framework: A supportive policy and regulatory framework is needed to create a level playing field for foundational businesses and to ensure that they are able to thrive.

6. Evidence & Impact

Notable Adopters:

Welsh Government: The Welsh Government has been a pioneer in adopting the foundational economy as a central pillar of its economic development strategy. It has launched a range of initiatives to support foundational sectors, including a £4.5 million Foundational Economy Challenge Fund.
Preston City Council, UK: The “Preston Model” is a widely cited example of a successful foundational economy strategy. The council has worked with a range of public sector partners to redirect their procurement spending to local businesses, creating jobs and wealth in the local community.
Barcelona City Council, Spain: Barcelona has been at the forefront of the municipalist movement, which shares many of the same principles as the foundational economy. The city has taken a number of steps to reclaim public services, support cooperatives, and promote a more just and sustainable economy.
Vienna, Austria: The city of Vienna has a long history of providing high-quality public services, including social housing, public transport, and childcare. It is often cited as a model for how to build a strong foundational economy.
Various Local Authorities in the UK: A growing number of local authorities in the UK are adopting foundational economy principles, including in Manchester, Birmingham, and the Western Isles of Scotland.

Documented Outcomes:

Increased Local Spending: The Preston Model has resulted in a significant increase in local procurement, with an additional £75 million being spent with local suppliers in 2016/17 compared to 2012/13.
Job Creation and Improved Working Conditions: Foundational economy initiatives have been shown to create jobs and improve working conditions in foundational sectors. For example, a study of the foundational economy in Wales found that it accounted for 51% of all employees in the country.
Improved Public Services: By bringing services back under public control and investing in social infrastructure, foundational economy strategies can lead to improved public services. For example, the re-municipalization of water services in Paris has led to lower prices and improved quality.
Greater Community Resilience: By strengthening local economies and building social capital, the foundational economy can help to create more resilient communities that are better able to withstand economic shocks.

Research Support:

The Foundational Economy Collective: This group of academics and researchers has been instrumental in developing the concept of the foundational economy and in providing the intellectual underpinning for its implementation.
Centre for Local Economic Strategies (CLES): CLES is a leading UK think tank that has been at the forefront of promoting community wealth building and the foundational economy.
The Welsh Centre for Public Policy (WCPP): The WCPP has conducted extensive research on the foundational economy in Wales, providing evidence and analysis to support the Welsh Government’s strategy.

7. Cognitive Era Considerations

Cognitive Augmentation Potential:

Smarter Public Services: AI and automation can be used to make public services more efficient, effective, and responsive to citizen needs. For example, AI-powered chatbots can provide 24/7 support for citizens seeking information about public services, while predictive analytics can be used to identify and address problems before they become crises.
Personalized and Preventive Healthcare: AI can be used to analyze large datasets to identify patterns and predict health risks, enabling more personalized and preventive healthcare. For example, wearable devices can monitor a person’s health in real-time and alert them to potential problems, while AI-powered diagnostic tools can help doctors to make more accurate diagnoses.
Optimized Energy and Resource Management: AI can be used to optimize the use of energy and other resources in the foundational economy. For example, smart grids can be used to balance the supply and demand of electricity, while AI-powered logistics systems can be used to reduce food waste.
Enhanced Learning and Education: AI can be used to create more personalized and engaging learning experiences for students of all ages. For example, AI-powered tutors can provide one-on-one support to students who are struggling, while virtual reality can be used to create immersive learning environments.

Human-Machine Balance:

While AI and automation have the potential to augment the foundational economy, it is important to ensure that they are used in a way that complements, rather than replaces, human skills and expertise. The foundational economy is built on relationships of care and trust, which cannot be automated. The human touch will always be essential in sectors such as healthcare, education, and social care. The goal should be to create a human-machine balance, where AI is used to support and empower human workers, not to replace them.

Evolution Outlook:

The cognitive era will likely accelerate the shift towards a more foundational economy. As AI and automation make many traditional jobs obsolete, there will be a growing need for work that is focused on care, creativity, and community. The foundational economy is well-positioned to meet this need, providing meaningful and fulfilling work for people in a post-work world. However, it is important to ensure that the benefits of AI and automation are shared widely, and that they are used to create a more just and sustainable society, not to exacerbate existing inequalities.

8. Commons Alignment Assessment (v2.0)

This assessment evaluates the pattern based on the Commons OS v2.0 framework, which focuses on the pattern’s ability to enable resilient collective value creation.

1. Stakeholder Architecture: The Foundational Economy framework inherently defines a broad stakeholder architecture by focusing on universal access to essential services. It implicitly assigns rights to citizens (the right to a good life) and responsibilities to a mix of public, private, and third-sector providers to deliver those services under a “social license.” This approach moves beyond a human-centric view to include the well-being of communities and the local environment as key stakeholders in economic activity.

2. Value Creation Capability: The pattern excels at enabling collective value creation that transcends purely economic metrics. By prioritizing “wellbeing as the ultimate goal,” it explicitly values social value (equity, access to health and education), ecological value (sustainable resource management), and resilience value (stronger local economies). It provides a direct framework for re-orienting economic activity towards the production of these diverse forms of value for the entire community.

3. Resilience & Adaptability: Resilience is a core outcome of the Foundational Economy, which aims to create stable local systems for providing essentials, reducing dependency on volatile global markets. Its emphasis on place-based solutions and pragmatic experimentation allows communities to adapt the framework to their specific context and challenges. The pattern helps systems maintain coherence under stress by strengthening local supply chains and fostering community wealth.

4. Ownership Architecture: The framework challenges traditional ownership models by promoting a diversity of forms, including cooperatives, public ownership, and community-owned enterprises. It reframes ownership for private actors through the concept of a “social license,” where the right to operate is tied to the responsibility of delivering community benefit. This defines ownership less by monetary equity and more by stewardship and social obligation.

5. Design for Autonomy: The Foundational Economy’s emphasis on localism, decentralization, and clear rules makes it highly compatible with autonomous systems. Its principles can inform the design of DAOs aimed at managing local resources or public services, with the “social license” concept serving as a programmable constraint. The focus on essential services with clear, non-discretionary outputs creates a low-coordination-overhead environment where autonomous agents could effectively operate.

6. Composability & Interoperability: This pattern is highly composable, designed as a framework to be combined with other patterns like Community Wealth Building, Socializing Finance, and various forms of co-production. It can be applied across numerous domains (health, energy, food, housing), allowing it to interoperate with domain-specific patterns to create larger, integrated value-creation systems. Its modular, zonal view of the economy inherently supports integration with other economic models.

7. Fractal Value Creation: The pattern demonstrates strong fractal properties, as its core logic of identifying and strengthening essential services can be applied at nearly any scale. The documentation explicitly states it can be used from the household and community level up to regional, national, and even international policy frameworks. This scalability allows the value-creation logic to be replicated and adapted across different levels of social organization.

Overall Score: 4 (Value Creation Enabler)

Rationale: The Foundational Economy provides a powerful and comprehensive framework for re-orienting economic activity towards resilient, collective value creation. It strongly enables most pillars of the v2.0 framework, particularly in its multi-stakeholder approach, diverse value definition, and focus on resilience. It offers a clear alternative to extractive economic models.

Opportunities for Improvement:

The framework could be strengthened by developing more explicit mechanisms for governing the “social license” of private providers, potentially using digital tools for transparency and accountability.
While compatible with AI, the pattern could more directly explore how autonomous systems and DAOs can be leveraged to manage and optimize foundational services.
Further development could focus on creating standardized, interoperable metrics for measuring the non-economic value (social, ecological) it generates, enhancing its composability with other systems.

9. Resources & References

Essential Reading:

Foundational Economy Collective. (2018). Foundational Economy: The Infrastructure of Everyday Life. Manchester University Press. This is the seminal text that introduced the concept of the foundational economy. It provides a comprehensive overview of the theory and practice of the foundational economy, and is essential reading for anyone who wants to understand this important new approach to economic development.
Bentham, J., Bowman, A., Erturk, I., Froud, J., Johal, S., Law, J., … & Williams, K. (2013). Manifesto for the Foundational Economy. CRESC. This manifesto was the first public statement of the foundational economy collective. It provides a concise and powerful argument for a new approach to economic policy that prioritizes the needs of citizens and communities.
Coote, A. (2020). Universal Basic Services: The Case for a Foundational Economy. Polity Press. This book makes the case for universal basic services as a key component of a foundational economy. It argues that everyone should have a right to access essential services such as healthcare, education, and housing, and that these services should be provided free at the point of use.

Organizations & Communities:

The Foundational Economy Collective: This is the group of academics and researchers who developed the concept of the foundational economy. Their website is a valuable resource for anyone who wants to learn more about the foundational economy.
Centre for Local Economic Strategies (CLES): CLES is a leading UK think tank that has been at the forefront of promoting community wealth building and the foundational economy. Their website is a rich source of information and resources on these topics.
The Welsh Government: The Welsh Government has been a pioneer in adopting the foundational economy as a central pillar of its economic development strategy. Their website provides a wealth of information on their foundational economy initiatives.

Tools & Platforms:

Foundational Economy Hub: This online platform provides a space for people to learn about the foundational economy, share best practices, and connect with others who are working to build a more foundational economy.

References:

Bärnthaler, R., et al. (2021). Foundational Economy and Eco-Social Transformation. ZOE-Institute for future-fit economies.
Bentham, J., et al. (2013). Manifesto for the Foundational Economy. CRESC.
Calafati, L., et al. (2023). The Foundational Economy: A new perspective for sustainability transitions. Environmental Innovation and Societal Transitions, 46, 100699.
Coote, A. (2020). Universal Basic Services: The Case for a Foundational Economy. Polity Press.
Foundational Economy Collective. (2018). Foundational Economy: The Infrastructure of Everyday Life. Manchester University Press.
Getzner, M. (2025). Conceptualizing the Foundational Economy as a Cornerstone of Biodiversity Conservation and Restoration. Sustainability, 17(24), 11296.
Riepl, T. (2025). The foundational economy: Focusing on what matters. Exploring Economics.