PROVIDENCE — The local
business movement is poised for major growth in Rhode Island and across the
country, according to Michael Shuman, an economist and expert on local business
development.
The catalysts for
change, Shuman said during a recent visit to Rhode Island, are new crowdfunding
opportunities for investing in neighborhood businesses, coupled with a growing
belief that locally owned businesses, especially farms, are better for the economy
and the environment than national chains and conglomerates.
Crowdfunding
Like Kickstarter and
Indiegogo, a new type of crowdfunding will allow small businesses and startups
to receive capital from a large audience of contributors. Forthcoming regulations
from the Securities Exchange Commission will make it more affordable to launch
a public investment offering while opening funding up to less-affluent
investors with smaller infusions of cash. Essentially, the new investment
platform, which will be online, will offer a potential return on investment in
place of a venue for making donations. The SEC is expected to issue the new
crowdfunding rules this fall.
Buy local
The story of
Zingerman’s Delicatessen in Ann Arbor, Mich., was one of the most vivid examples
of local business success Shuman gave during his Sept. 8 talk at Brown
University. Rather than expand by replicating its popular deli elsewhere, the
owners stayed local and created new but ancillary businesses such as a bakery,
creamery and coffeehouse. Nine new businesses eventually led to more than 500
jobs, Schuman said.
Most economic
development takes the opposite approach, he said, by fixating on landing a
corporate, multinational businesses like a Toyota plant or Walmart. Yet, the
sacrifices used to lure such companies, like tax breaks, rarely create the
promised jobs and ultimately harm the economy, according to Shuman.
“Economic development
today is destroying local businesses,” he said.
Businesses that grow
locally demonstrate one of the most effective economic strategies: maximizing
local self-reliance, Shuman said. “And they don’t need subsidies in order to
get there.”
Independent business
owners, especially those in the retail and food sectors, also contribute to
tourism, have more interest in local issues and are more apt to vote. Local
business owners also are more likely to support smart-growth principles such as
multi-use village centers. “You just can’t have a walkable community in a
big-box hell hole. It just doesn’t work,” Shuman said.
Ultimately, money
customers spend at a local business stays local. Shuman cited a dozen studies
that conclude money spent at independent businesses is reinvested in other
local businesses. On average, he said, locally owned spending creates at least
three times the economic benefit than spending at a nonlocal one. “Local
businesses consistently spend more money locally and thereby generate more
jobs,” Shuman wrote in his latest book, “Local Dollars, Local Sense.”
New investment choices
also give owners more options to keep the wealth local if they decide to cash
out, sell or transfer their company to new owners. “There’s a whole middle
territory that now we are going to give (business owners) the ability to
finance at the local level,” Shuman said following his Sept. 9 presentation to
local business leaders and government officials at the Rhode Island Foundation,
as part of its "It's
All In Our Backyard" campaign.
Local land
Densely populated
states such as Rhode Island face pressure on open space, straining one of its
best economic resources. “There’s every incentive to convert land to
subdivisions,” Shuman said.
New zoning rules are
needed to protect land for agriculture, he said, while new farmland could be
opened up along highways, at airports and on rooftops. Urban farms also
produce a cleaner, healthier environment, reducing air pollution and stormwater
runoff. A significant shift to local agriculture creates jobs, tax revenue
and promotes business in regional markets.
“Let’s not get hung up
that local must be Rhode Island,” Shuman said.
Nonlocal companies,
Shuman said, are more likely to harm the environment and tend to resist tougher
environmental standards by threatening to relocate if new regulations are adopted.
He also referred to an Environmental Protection Agency (EPA) study that showed
nonlocal companies tend to do more damage to the environment by releasing more
toxins than a local business.
Shuman said local land
trusts should expand their role in the community by doing more than protecting
open space and farmland.
“I would like to see
land trusts used for commercial development so that land trusts basically start
acquiring parcels downtown to fill in gap teeth so you get coherent block
structures," he said. Land trusts could also serve as intermediaries,
buying commercial properties from usurious landlord in order to stabilize a
business until a better landlord is found, he added.
"We've just
barely scratched the potential of how land trusts could be used," Schuman
said.
Better value
Higher prices are the
most common objection to buying local. However, "You get what you pay
for," Schuman said, noting that many products from chain stores are
inferior. In an expanding service economy, the price of goods is also having
less impact on a personal budget. “Let’s not think of it in terms of price.
Let’s think of it in terms of value,” he said.
Entrenched obstacles
to the buy-local movement, such as changing the buying habits of consumers who
are loyal to brands and low prices, will be the job of advocacy groups,
nonprofits,
and consciousness companies, he said. “It would be smarter if social change activists really went to business school and thought about how they could take the work they do and create revenue streams around it so the work can stabilize and grow.”
and consciousness companies, he said. “It would be smarter if social change activists really went to business school and thought about how they could take the work they do and create revenue streams around it so the work can stabilize and grow.”
These considerable
tasks will have help, as $15 trillion of investable funds could flow
towards local business investment through existing and new crowdfunding opportunities,
ones that often have better returns than Wall Street investments.
“I believe we are
really on the precipice of huge change,” he said.
