Local Economy Solution
For five years I was the owner of Genesis Computers in Bloomington. I wasn’t a good businessman, but I understand some of the difficulties and challenges in running a small business.
Americans agree, Wall Street can’t be trusted, but people trust in local Main Street businesses to keep their money close to home.
The best kind of business for economic development, the best kind of business for resilience, with businesses that are competitive, the evidence is absolutely clear that locally owned businesses and local self-reliance is the ticket to prosperity in this country.
Half of the US economy is local small business along with half the jobs; yet, virtually all of the economic development investment subsidies have been for non-local businesses. It’s remarkable how well small business has done despite the best efforts of public policy to kill them. I’d like to see that change.
Most of the focus on community development has centered on “ATTRACT AND RETAIN” policies. Yet, you cannot attract a local business and if you have to pay a corporate welfare bribe to attract or keep them, then how local are they anyway. We need a different approach that develops our local businesses.
When it comes to economic development, we don’t have an unlimited budget and unlimited time. Every dollar we spend on a pointless attraction or retention is a dollar that is not spent nurturing our local self-reliance. Every hour spent attracting business outside our communities is an hour not spent working shoulder to shoulder with our local businesses. My responsibility as a civil servant is to get the most impact for the least cost. It is clear to me that supporting local business is going to be the most effective way of promoting local prosperity.
Locally owned businesses spend more of their money locally and thereby pump up the local economic multiplier effect. An analysis in 2002 demonstrated that locally owned merchants generate more than three times the local economic activity of their competitor chain stores on equal revenue. Buying the same book at the same price at the local bookseller the community got three times the jobs, three times the income and wealth effects, three times the tax collections, and three times the charitable contributions. In study after study, when you spend at a locally owned enterprise you get two to four times the jobs and other economic development impacts as you would get at non-locally owned businesses. Significantly, there has not been a study to show otherwise.
The strongest and most prosperous communities first, maximize the local ownership of business and second, maximize local self-reliance.
The mistake of economic development is the assertion that if you could just focus on the global side of the picture the local side takes care of itself. In fact, it works in exactly the opposite direction. When you focus on local businesses and nurture them and grow them many of them will naturally start looking to global markets and they won’t need subsidies to get there.
Let’s Get Growing – Support your local Minnesota businesses.
How to Nurture Local Business?
Economic Leakage Analysis—let’s plug up our economic leakage through import substitution. I propose that Minnesota do a community by community leakage analysis, starting with the poorest communities, identifying all those things in the local economy where people are unnecessarily buying outside goods and services. Those unnecessary imports represent money leaking out of your economy. If we can plug those leaks with new import substituting business we can grow the economy and pump up the local multiplier. (For example: Instead of exporting our dollars to oil, gas, and coal producers outside Minnesota, we could substitute renewable energy and keep that money in Minnesota.)
Support Entrepreneurs: How can we support a new generation of local entrepreneurs?
What about helping new entrepreneurs by supporting Single-Payer Health Care to reduce one of the biggest burdens on new businesses. How about setting up a self-directed IRA’s or Solo 401(k) to direct some of your retirement investments to Main Street instead of Wall Street. Investing is risky, so buyer beware, but a diversified portfolio spreads out the risk.
Harness Local Investment: How can we bring capital into local business?
- Establish a Bank of Minnesota – Like the Bank of North Dakota, profits from the bank are either depositoted in North Dakota’s general fund, or are used to support economic development in the state promoting community lending, local business, and grassroots investment. See Take Back the Money Power.
- Minnesota Transportation Act – An act introduced in 2011 that would regulate state chartered banks to create needed infrastructure. Since you can’t have local commerce without transportation, the whole system works exactly the same as it does now, except with one small accounting change in the genesis of money creation. In other words, we will be monetizing production of infrastructure for the benefit of the people without taxation and without borrowing. See Take Back the Money Power.
- Move Public Money – Deposit Public Funds in Local Main Street Banks not Wall Street Banks. In 2010, HF3205 would have given small banks and credit unions throughout Minnesota preferential treatment over large financial institutions in bidding for deposits of state funds. Small banks touted it as a way to spur economic development in outlying parts of the state, even if the deposits were minimal. They argued that smaller banks and credit unions have nurtured closer and more enduring relationships with their customers and are more likely to lend to local small business owners. The bill never made it out of committee partly due to the fact that it was opposed by the Minnesota Bankers Association. See https://www.revisor.mn.gov/bills/text.php?number=HF3205&type=bill&version=0&session=ls86&session_year=2010&session_number=0
- State Stock Exchange – MNVest is a local stock exchange that provides crowdfunding for any resident of the state to invest up to $10,000 per person per offering in local businesses. Of course, investing in securities can be risky, so buyer beware, but many Minnesotans invest in non-local securities on Wall Street, but invest nothing in the other half of the economy located in Minnesota and the returns are higher. I’d like to see that change. (See mnvest.org)
- Keep your money in a local bank or credit union – which on average gives 56 percent of their loans to local businesses, while big banks only give 18 percent.
- Issue Bonds to Support Local Businesses – Your local government issues bonds all the time, often to support economic-development projects. How about creating bonds to finance local businesses? Perhaps create “food bonds,” the proceeds of which might go into a local fund that collateralized loans from local banks and credit unions to high-priority local food businesses. Properly structured, the interest from these bonds could be tax exempt, and these bonds could be purchased by residents of your community.
Creating Networks – How do we create networks of local business that are more competitive together than they would be just competing against one another? Collectively buying products and equipment they use regularly to reduce their costs through collaboration.
Buy Local – We need to spearhead “local first” campaigns. Economic developers need to ask, “How do you get more consumers to purchase more items locally more of the time?”
Public Policy – What is needed most by public policy is coordination. From the perspective of entrepreneurs, they see an alphabet soup of organizations out there and they don’t know how to navigate them. So we need to create a coordinated infrastructure for them so people know where to go to meet their needs.
Now get out there, support and enjoy some lively, local businesses!