News From The Field

The Incentive of Building Local

14 December 2012
BY Michelle Long, Executive Director, BALLE
PUBLISHED IN Huffington Post

A recent New York Times special report described the squandered opportunities of economic development in local communities across America as tax incentives tallying more than $80 billion are handed out to oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains — usually with no concrete benefit, no jobs, no improved economic climate.

What a waste.

The New York Times states, “The incentives come in many forms: loans, sales tax breaks, income tax credits and exemptions, free services, and property tax abatements. The income tax breaks add up to $18 billion and sales tax relief of around $52 billion of the overall $80 billion in incentives.”

When communities spend scarce funds attracting jobs that don’t exist, everyone loses. The taxpayer, schools, local and private sector employers are out millions of dollars and have nothing to show for it.

Are there any alternatives?

Through my decade of work and learning in the local economies movement (we call it Localism), I know that creating real prosperity is about building communities that are more healthy and collaborative — backed by local economies that are stronger and more resilient. This means expanding and diversifying local ownership, import substitution, and business cooperation in a particular place, and results in more wealth and jobs per capita.

Building local economies from within — investing in the people and local businesses rooted right where they are — offers profound, long-term outcomes.

And the evidence is in: From Economic Development Quarterly to Harvard Business Review, communities with a higher density and diversity of local, independently owned businesses have more wealth, jobs, and resiliency than communities that rely on large corporations and big box retailers as “job creating” employers. Rather than funneling wealth into a few hands, strengthening local business ownership results in more wealth and jobs for more people, and greater personal accountability for the health of the natural and human communities of which we are a part.

It turns out, size does matter, and in this case — bigger is definitely not better.

An approach to community economic development that fosters local business ownership and sustainability isn’t new, and thankfully, it’s becoming more mainstream every day. Through our work at BALLE we hope to inspire people to re-imagine a world where financial transactions reflect balance between people and the natural world, supporting ecosystems that sustain us. A world where we naturally take care of who and what takes care of us.

We have seen first-hand the local business owners who, after being impacted by the lack of accountability to their communities, are re-claiming the health and wealth of particular places. And they are succeeding against long odds.

We’re helping them succeed by leveraging the BALLE Local Economy Fellowship – the only one of its kind in the nation – which began in 2011, to amplify and accelerate the work happening in local communities.

Working in isolation is never easy, and we know that the best solutions come from collaboration. The Local Economy Fellows are entrepreneurs, economic development officers, community organizers or anyone else who is rethinking how local communities grow and thrive from the ground up. By applying their passion for social change to business-oriented solutions, and through sustainable innovations in manufacturing, finance and food, BALLE Local Economy Fellows use locally owned businesses as a springboard for social change and economic equity.

An economic and cultural transformation of this magnitude will require sustained commitment and the effective collaboration of well-supported leaders, working strategically toward our shared vision.

Our Local Economy Fellows help restaurants source directly from local farms, redirect local dollars toward investing in local businesses, educate local governments about how to work with independent businesses to create green jobs for low-income communities. It’s a move from competition to collaboration that provides economic benefit and maybe more importantly, deep pride and empowerment in individuals and communities — an understanding that we are here to help each other.

The vision is not without grandiose expectations: We want nothing less than a new economy. And we’re not alone. In Philadelphia, city government is changing policy to support small businesses because those employers are creating the most new jobs in this economy, and in Arizona, a local procurement database now exists to give local businesses a fighting chance when competing against out-of-state chains — something that has generated close to $20 million in revenue for the state of Arizona, just by keeping those dollars local.

Our Local Economy Fellows aren’t waiting for big government or big business to step in and fix all that ails a dying system; instead they are working together to change economies right where they are, starting with the tools and resources they have: human capital, resourcefulness, and an entrepreneurial spirit.

And while these subsidies have extracted public dollars into the private bank accounts of a few, our Fellows have gone about collaborating with their own communities to build wealth.

Imagine what $80 billion in incentives could do if it was invested in thousands of locally owned businesses and those that connect and strengthen them, all across America. We know that when one dollar is spent in a local business, 64 cents stays in the local economy. When that same dollar is spent in a big box or chain, only 32 cents stays local.

Not only is Localism a critical component of a local economy, but it’s also critical to our social and civic outlook as well. Having a strong foundation of locally owned businesses translates into better social capital, a more engaged constituency, higher voter turn-out and more free speech than those communities without this foundation. And with a 40-year low for global food reserves, the importance of having a strong local agriculture option is key to resiliency as well. When it comes to banking, local banks are better at identifying risky borrowers and therefore maintain stronger portfolios than national conglomerates that make decisions off credit scores or statistical analysis that never take into consideration the whole picture. For that reason, we know large banks aren’t lending, especially to small businesses. A recent study showed that half of all small businesses surveyed were unable to obtain financing. And we know that the big banks, the big four, now account for 60 percent of the global lending market. And Bank of America alone is bigger than all local banks combined.

The good news though is that our money is moving from Wall Street to Main Street at the highest rate in history. Six-hundred thousand of us moved our money from national big banks to local banks in the last few years. And we’re starting to measure what matters by looking not just at price when it comes to shopping, but the big picture of health benefits, value, engagement and more.

That is why each month we’ll be telling the stories of leaders who are transforming our communities from within, and highlighting the victories of our Local Economy Fellows who are innovating in these areas.

Thanks to the visionary support of our partners (NoVo Foundation, Surdna Foundation, The Monitor Institute, The Improve Group, RSF Social Finance), we are resourcing Local Economy Fellows to spur growth locally, the right way — taking into account what human beings need in order to thrive, feel safe, seen and valued. To quote the Skoll World Forum, we are “dedicated to a world built upon collaboration, locally and globally. True prosperity has much more to do with human experience than numbers on a balance sheet.”

Unlike other Fellowship programs, we aren’t focused on scaling one social enterprise, but instead are convening whole communities of businesses around a shared vision of collaboration and real prosperity. The new 2013 group of Local Economy Fellows was selected through referrals and support from some of the most respected and well-known organizations in our field: Ashoka, New World Foundation, Rising Tide Capital, Rutgers Social Innovation Institute, Social Venture Network and Surdna Foundation. These sixteen new Fellows are localizing food systems, reversing long-term unemployment trends, and transitioning the workforce toward new economy jobs in communities from Detroit to Oakland to Appalachia.

At BALLE we see the Local Economy Fellowship as the heart of an emerging movement toward strong, resilient and inclusive local economies. Our intent is nothing less than to strengthen America’s collective leadership capacity to make and grow the things we need to live — in harmony with our natural world, and to re-awaken within ourselves, the understanding that we are meant to help each other.