GRAND RAPIDS — For every $100 a person spends at a locally based business, $70 stays in town. If a person spends the same amount at a non-locally based business, only $40 stays in town.
That was the message Local First founder and Chairman Guy Bazzani underscored at the kickoff of the “Buy Local” holiday campaign Monday.
“So remember folks this holiday season to buy local first,” Bazzani told about 130 people gathered for the campaign launch. He said Local First’s mission is to educate the community as to the value of a locally based economy and to build a network of local businesses that work and communicate with one another.
Keynote speaker at the event was Michael Shuman, an attorney, economist, entrepreneur and author of half a dozen books, including “The Small Mart Revolution: How Local Businesses Are Beating the Global Competition.” He was hosted by Local First, the Center for Sustainability at Aquinas College, and River Bank Books and Music.
Shuman said in the United States there’s a struggle between two models of capitalism: what Shuman calls TINA (There Is No Alternative to globalization) and LOIS (Locally Owned and Import Substituted).
“Import substitution doesn’t mean cutting yourself off from the world,” Shuman said. “The strongest economy is going to be one that is simultaneously as self-reliant as possible and has a strong export component to its economy. The last piece of local living economies is the living piece — the socially responsible ideas of high labor and environmental standards.”
In recent years Shuman has been promoting the concepts of “going local” through a variety of projects, including: creating a small-business venture capital fund in New Mexico; launching a community-owned company in Salisbury, Md. called Bay Friendly Chicken; and organizing university-government-business collaborations in St. Lawrence County, N.Y. and in the Katahdin Region in Maine.
Shuman said there are three reasons why communities should embrace LOIS. LOIS firms don’t move out of the community and they tend to maintain higher standards, he said. On the other hand, when a large TINA company moves its plant elsewhere, the impact on the community can be catastrophic in terms of lost jobs.
“That kind of catastrophe does not take place in an economy that is largely made up of diversified locally owned businesses,” Shuman said. “A community that is largely made up of locally owned businesses can raise labor and environmental standards with confidence that those businesses are going to adapt rather than flee.”
According to Shuman, any business model that depends on the shipment of goods 10,000 or 15,000 miles in an era of global warming cannot inherently be sustainable. A sustainable model includes sustainable manufacturing, a sustainable food system and a sustainable energy system.
LOIS companies also have higher economic multipliers, he said. He gave as an example a study that analyzed the economic impact of a local bookstore and a Borders bookstore in Austin, Texas. One hundred dollars spent at Borders led to $13 remaining in the community, whereas $100 spent at the local bookstore led to $45 being circulated in the community.
“Roughly speaking, in multiplier terms, every local expenditure yielded three times the benefits — three times the tax collections, three times the jobs, and three times the incoming wealth,” he said. “The reason this study and a dozen other international studies all have pointed in the same direction is obvious: Local businesses spend more of their money locally. Almost always when you have local and non-local businesses, you’re going to get more economic impact from the local business.”
Furthermore, LOIS businesses support cutting-edge theories of economic development, such as smart growth, cool downtowns and creative economies, Shuman said. Conversely, it’s impossible to have a large scale TINA enterprise and smart growth.
What attracts visitors is the uniqueness of a community’s bars, restaurants, nightlife, museums and local history, he said. It also attracts “the best and the brightest” — the basis for a growing economy. The most prosperous communities are going to be those that have a diversified economy; they honor diversity, creativity and entrepreneurship.
“A community that’s built on assembly line workers and hamburger flippers and checkout clerks at Wal-Mart is the opposite of a creative economy,” Shuman remarked. “I’d say that compared to much of Michigan, Grand Rapids is one of the great creative economies in this state, and that’s why its doing so much better than other communities in this state.”
The average economy in the United States is about 80 percent local, and 60 percent to 80 percent of new jobs are created by small business. Shuman said any public policy that focuses on the 20 percent that’s not local is a fundamentally misdirected policy. According to his estimates, every year state and local governments give $50 billion in subsidies to non-local businesses, and the federal government gives $63 billion in subsidies to non-locals.
“Antitrust rules that should have made much of Wal-Mart’s behavior predatory and illegal have been systematically un-enforced for the last 25 years,” Shuman said. “Every place you look, you see a double-diamond slope of disadvantage that local businesses face. If we had gotten public policy half right over the last 10 years, local businesses wouldn’t have lost 3 to 4 percent share in the economy over the past decade. If we get it right over the next 10 years, we’re going to see the ‘small mart’ revolution.”
Shuman outlined six “action steps” for transforming a local economy from the TINA to the LOIS model:
- Provide entrepreneurship training, promote mentorship and create business incubators.
- Mobilize small businesses to work together, participate in bazaars and other events together, and take part in producer cooperatives.
- Think local first and encourage people to buy local.
- Encourage residents to “localize” by transferring home mortgages to locally based banks or credit unions, and encourage them to destroy out-of-state credit cards, conserve energy, shop smart and live healthy.
- Boost economic development by identifying where entrepreneurship should be focused and plug the leaks.
- Mobilize investors to create local stock and local exchanges.
- Push for public policy reform in tax law, incentives law and securities law that will stop giving the advantage to non-local businesses.