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Henry George in his classic Progress and Poverty (published in 1879) said that all wealth resulted from the labor of the worker. The worker used his skill and creativity to transform natural resources into things to satisfy human needs and desires. This process was the basis of capital as well as all economic activity. Capital did not create jobs, workers did.
The current paradigm says economic growth, jobs, and prosperity are created from the top down. Give the super wealthy more and they will “invest” in the economy, jobs will be created, and everyone else will benefit. A rising tide lifts all boats. But it should be obvious that not all boats are being lifted in our current economy. The statistics on stagnate wages, unemployment, underemployment and rising inequality are clear. We have had over 40 years of experience with this philosophy and prosperity has not trickled down.
There is also considerable evidence that the super wealthy don’t necessarily invest in local communities or even in the U.S. Rather they chase cheap labor, lower costs, and lower environmental standards elsewhere. They also engage in wild asset speculation like computer driven high frequency trading. Even when they do bring the corporate chain to town the profits leave the local community. It is an extractive rather than inclusive process and the overall, local economic gain is limited.
The top-down approach believes big business drives employment and economic growth. Local communities have to bribe them to come with incentives and tax breaks. But there is a growing understanding that bottom-up development works better. I have suggested this community based approach for Superior in a prior article (see “sources” below). I was not dreaming of a socialist utopia. It is happening in many places across the country.
Ashland has been exploring this approach. As reported on Wisconsin Public Radio, Ashland is working with Democracy Collaborative, a national non-profit which promotes sustainable, locally based economic development strategies. The top down strategies haven’t worked. WPR quotes Linda Jorgenson, co-chair of the Ashland/Bayfield Counties League of Women Voters, on the failure of traditional development strategies,
“We’ve been waiting around probably since the ‘60s when the mines closed for somebody to establish some big manufacturing entity in our area that would be paying $30 an hour,” Jorgenson said. “Manufacturing has been going overseas in that 50-year time period. It hasn’t been moving into Ashland.”
Democracy Collaborative promotes broad based, local ownership solutions that connect business, government, and local “anchor institutions” to build community wealth. They emphasize using local resources and strengths to meet the needs of local people, including low income people and minority groups. They suggest that anchor institutions, like hospitals, universities, government agencies, and public school districts can help with more local buying. Developing land trusts, worker owned businesses, cooperatives, and supporting local small businesses keeps profits in the community. Using traditional business incentives and tax breaks for local companies is a better approach. They say on their web site,
“What’s emerging is a systems approach to creating an inclusive, sustainable economy where all can thrive.”
Other organizations echo these ideas. The Institute for Local Self-Reliance challenges the conventional wisdom that bigger is better. They claim small business is often more efficient, stable, more connected to the consumer, and better for the environment. The ILSR web site says,
“Places that are home to numerous locally owned businesses are more prosperous, sustainable, and resilient than those in which much of the economy is controlled by a few big corporations.”
The Institute backs its statements with research done by a variety of other organizations. They list a growing body of research that shows small-scale, locally owned businesses create communities that are more prosperous, entrepreneurial, and better off in many ways.
The research indicates that on:
Economic return: local businesses recirculate a greater share of every dollar in the local economy
Employment: local businesses employ more people per unit of sales and retain more employees during economic downturns
Jobs: big-box retailers decrease the total number of retail employees in a region
Public subsidies: big businesses receive massive public subsidies that have failed to produce real economic benefits for communities
Taxes: large retailers avoid tax obligations while locally owned business generate more tax revenue, with less cost, than big-box shopping centers
Start-ups: as the economy has become dominated by fewer, larger companies, there’s been a sharp decline in the formation of new businesses
Impact on existing businesses: big-box retailers lead to a loss of existing businesses and do not promote new growth locally
The community based approach is collaborative, inclusive, and more democratic (thus the name Democracy Collaborative). The goal is to build local community well being and prosperity rather than maximizing “shareholder value” for absentee owners.
Is this realistic? Judge for yourself. Read about the many examples happening all over the country in “Cities Building Community Wealth” from the Democracy Collaborative (see “Sources” below). The report lists successful projects in 20 cities including Madison and Minneapolis.
It is time for new strategies to revive our communities. Continuing the failed top-down economic development is not a good strategy. Waiting for an economic savior is not realistic. The work of collaboratively building local wealth though expanded local ownership will not be easy. But it is essential to building prosperous, sustainable economies.
Sources and Additional Reading
“Community Solutions for Superior’s Economy,” Duluth Reader, Phil Anderson, May 12, 2016, HYPERLINK “http://duluthreader.com/articles/2016/05/12/7217_community_solutions_for_superiors_economy”http://duluthreader.com/articles/2016/05/12/7217_community_solutions_for_superiors_economy
“Ashland Area Explores Development Alternatives College, Community Officials Want To Keep Money In The Community”, Wisconsin Public Radio, Danielle Kaeding, Wednesday, June 22, 2016, HYPERLINK “http://www.wpr.org/ashland-area-explores-development-alternatives”http://www.wpr.org/ashland-area-explores-development-alternatives
“Cities Building Community Wealth,” Democracy Collaborative, Marjorie Kelly, Sarah McKinley, Violeta Duncan, 2015, HYPERLINK “http://democracycollaborative.org/sites/clone.community-wealth.org/files/downloads/CitiesBuildingCommunityWealth-Web.pdf”http://democracycollaborative.org/sites/clone.community-wealth.org/files/downloads/CitiesBuildingCommunityWealth-Web.pdf
Institute for Local Self-Reliance, web site “Overview”, HYPERLINK “https://ilsr.org/initiatives/independent-business/”https://ilsr.org/initiatives/independent-business/
“Key Studies: Why Local Matters,” Institute for Local Self-Reliance, Stacy Mitchell, Dec. 22, 2011 HYPERLINK “https://ilsr.org/key-studies-why-local-matters/”https://ilsr.org/key-studies-why-local-matters/