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By Michael Shuman

Author’s Summary

Across the country local elected officials—whether Democratic or Republican, progressive or conservative—have embraced three strategies for economic development: get Toyota to locate in your backyard; export your goods and services as widely in the world as possible; and lobby for more than your fair share of federal pork. The virtual consensus around these three strategies is stunning, because each is so clearly a dead end. In brief:

• To chase and seduce globally mobile firms usually forces a community to steadily erode its labor and environmental standards to maintain an attractive business climate.

• To promote export-led development tends to deny a community the economic benefits associated with a diverse economic base and to increase its vulnerability to forces far beyond its control.

• And to rely on federal pork, as defense-dependent communities have discovered, typically sets a community up for a terrible bout of Cold Turkey when the monetary umbilical cord is severed.

GOING LOCAL: CREATING SELF-RELIANT COMMUNITIES IN A GLOBAL AGE (Free Press, 1998) sketches alternatives to each of these wrong-headed strategies.

Rather than chase disloyal firms, a community ought to grow and nurture its own small businesses. Local ownership of the economy means that as a community raises labor and environmental standards, firms tend to adapt rather than flee. Local owners also are more likely to be satisfied with a modest positive rate of return on investment, and less tempted to move to Mexico or Malaysia to maximize profits. Most corporate models can be locally owned, but the ones most consistent with other progressive values are non-profits (which represent 6.5 percent of the U.S. economy), municipally-owned enterprises (6,300 nationally), cooperatives (47,000 nationally), worker-owned firms (2,500 in which workers hold a majority of shares through ESOPS), and community stock-held firms (see Pacifica Marine sidebar, p. 6).

Instead of promoting exports, a community ought to focus economic development efforts on firms that replace imports and increase local self-reliance. A steady process of import-replacement, as Jane Jacobs has argued, reduces a community’s vulnerability to global events beyond its control (like deflations, oil embargoes, or capital flights), pumps up the local economic multiplier (that is, the recirculation of locally spent dollars, which augments local income, wealth, and employment), and increases the flow of local tax revenues that can finance a healthy public sector. Mainstream economists counter that local production for local needs is not cost effective, and point to the proliferation of mergers as evidence that bigger is almost always cheaper. In fact, however, the economies of scale needed to meet most people’s basic needs are dropping. Increasingly, Americans will buy the most essential goods locally: food through community-supported agriculture and farmers’ markets, electricity from local wind-generators and rooftop photovoltaics, basic materials (like wood, plastic, paper, and metal) from regional recyclers, and financial services from well-run community banks.

Finally, GOING LOCAL suggests that a smart community ought to demand from state and federal authorities, not more pork, but more power. For example, a community might insist that state authorities provide the home-rule powers to replace ineffective property taxes with split-level property taxes (which tax land but not improvements and thereby penalize speculative land holding), or to replace regressive sales taxes with progressive income taxes. Or it might press the federal government for a congressional decree that local “green” taxes on pollution, waste, materials, or energy do not violate constitutional requirements for the free flow of interstate commerce.

A community that followed these principles might ensure that every public dollar—whether from grants, loans, tax abatements, or bonds—went only to locally owned, import-replacing businesses. To help ensure the success of these businesses, it might create systems of local business training, local finance (including credit unions and labor-sponsored investment funds), local input replacement (like the Oregon Marketplace), and local purchasing (through local currency systems and Time Dollars). It might lobby the federal government to revise the enormous number of federal laws—concerning, for example, corporate welfare, banking, insurance, and trade—that make global commerce unfairly cheap and local commerce expensive.

GOING LOCAL urges progressives to build an economy consistent with their vision rather than just fight global corporations that oppose that vision. A potential strength of this approach is that it enables the left to reach beyond the political margins and form real alliances with devolution-minded conservatives and small-business proprietors.

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