How the Environmental Movement Can Redefine Globalization

The following conversation with Michael Shuman is an excerpt from the new book Building the Green Economy: Success Stories from the Grassroots (PoliPointPress, 2007) by Kevin Danaher, Shannon Biggs, and Jason Mark. You can read more about the book here.

Michael Shuman is an economist, attorney, and Vice President for Enterprise Development for the Training & Development Corporation (TDC) of Bucksport, Maine. He has written, co-written, or edited six books, including The Small-Mart Revolution: How Local Businesses Are Beating the Global Competition (Berrett Koehler, 2006), and Going Local: Creating Self-Reliant Communities in a Global Age (Free Press, 1998). He lectures widely across the United States and is one of the most important thinkers writing about the local green economy.

Q: What motivated you to write your recent book, The Small-Mart Revolution, and what are some of the main points of the book?

Michael Shuman: In 1998 I wrote a book called Going Local: Creating Self-Reliant Communities in a Global Age. It got a very positive and broad response and helped promote the emergence of two business networks-the Business Alliance for Local Living Economies (BALLE), and the American Independent Business Alliance (AMIBA). So what started as anti-globalization in the 1990s morphed into engagement by progressive-minded small-business people. So when I saw the innovations that these grassroots groups were coming up with, I wanted to expand on the theme and explore all the innovative organizing going on in the small-business sector.

The book has three big themes in it. The first is to lay out all the reasons why locally owned businesses are much more reliable actors in promoting economic development in an equitable way. The second point is that small businesses are a lot more competitive than most people think. In many places small businesses are competing successfully against bigger retailers or bigger manufacturers or bigger banks, and I document the strategies they're using. And the third theme describes a coherent agenda on what communities can be doing to advance this local business revolution even faster.

The book examines how we should think differently about economic development, how we can promote local entrepreneurship, how coalitions of local businesses can be more competitive acting together than they might be if they operate just as individual firms. Then I talk about new ways of promoting buy-local campaigns and local investing (this is where some ideas for local stock markets have come out). And then finally, in public policy, I try to show that right now the economic development system is rigged heavily against local businesses. We're trying to get rid of those biases so that small businesses have as much chance of succeeding as large businesses do.

Q: In your book, The Small-Mart Revolution, you say "The small-mart revolution is not about ducking globalization, it's about redefining it." Can you elaborate?

MS: Some people have said, "If you're telling communities to withdraw from the world and be internally focused and less interested in global affairs, then this will be a colossal failure. We're in an era of globalization and we can't isolate ourselves from that." So the last chapter of the book shows that there are many ways that we can support local economies on a worldwide basis without falling into the trap of just getting involved in more conventional trade. That's what I mean by redefining globalization: promoting the globalization of mass movements, globalization of the sharing of ideas of public policy, sharing of small business technology so that every community that's engaged in this small-mart activity thinks of itself as having a duty to help other communities around the world to achieve a similar level of self-reliance.

Q: You contrast two very different models: local ownership and import substitution (LOIS) and the status quo position, which says, "There is no alternative" (TINA). Can you elaborate on this distinction?

MS: One of the questions that has dominated public discourse in the last ten years is, what kind of capitalism should we embrace? For discussion purposes in the book, I simplify the debate with two types of capitalism that I gave the names TINA and LOIS. TINA embodies the most conventional ideas about economic development. People with this perspective are trying to attract as many global companies (whether it be manufacturers or big-box stores) to come into their backyards, and they are trying to export as much as possible to the global economy. They're trying to convince the small-business community that the first two activities are somehow in the best interest of the local community.

The alternative is LOIS (locally owned import substitution), which is really saying that the most dynamic development stories are coming from communities that are mostly made up of locally owned businesses. They are trying to diversify their economies through greater degrees of self-reliance. There's a confidence in those communities that if you have a strong homegrown economy, then you can selectively participate in the global economy from a position of strength ra ther than one of vulnerability and weakness.

Q: You say that small firms produce 60 to 80 percent of all new jobs in the United States and 13 to 14 times more patents than large firms. Can you contrast locally owned companies and big corporations in terms of their impact on jobs and tax revenues?

MS: Let's focus on the local ownership piece for a moment. There are probably three big differences between local and non-local businesses that help explain why local ownership is so important. Local businesses don't run away as easily; they spend more of their money locally and thereby generate higher economic multipliers; and they tend to be smaller in size and thereby have a kind of a character that's more consistent with locally controlled economic development. Let me elaborate. The impact of local businesses not moving is that the wealth that they produce stays in the community for many years, often for many generations. It also means that the kind of catastrophe that one sees around the country when the big TINA firm leaves town is much less likely to occur. That catastrophe-if you're dependent on one big plant-can be enormous.

My current affiliation with the Training and Development Corporation in Maine came about in late 2002 after a paper company decided they wanted to shut down this hundred-year-old plant and to set up a new plant in Canada. The unemployment rate over the next year in this part of Maine grew to 40 percent. It was the equivalent of a nuclear bomb going off in that section of the country. So having a strong local business sector for your economy is an insurance policy.

On the second issue of economic multipliers, there have been about a dozen studies comparing local vs. non-local businesses-one study is by Dan Houston of Civic Economics-these studies have all shown that in terms of the economic multiplier, which is the building block for community economic development, local businesses generate two to four times more benefits than non-local businesses. That is because the local businesses spend their money locally. One great study of this was done four years ago in Austin, Texas. It looked at a hundred dollars spent at a Borders bookstore, compared to a hundred dollars spent at a local bookstore. Of the hundred dollars spent at Borders, 13 dollars stayed in the local economy and of the hundred dollars spent at the local bookstore, 45 dollars remained in the local economy. So in multiplier terms, every expenditure that one made at the local business led to roughly three times the local income, three times the jobs, three times the tax benefits. So it's not an inconsequential distinction between the two.

The last issue is the size and character of the local businesses. Local businesses are small and they tend to have their own unique character. So if you want to create diverse communities where people live close to school, shopping and work, it really takes smaller businesses to create a walkable community. When it comes to tourism, what attracts tourists is the unique character-driven kinds of businesses-not big-box stores that can be found anywhere.

Then there is the phenomenon explained by Richard Florida in his book The Rise of the Creative Class. He presents empirical evidence showing that the strongest communities are those that have a lot of diversity, tolerance, fun, and jobs that are creative: scientists, artists, entrepreneurs, and the like. Diverse small businesses controlled by local people give lots of different opportunities for people to enter into the economy and take full advantage of their skills-that's a creative economy. A local economy is the one that is going to be more creative and generate jobs that can attract and hold the best and the brightest.

Q: Would you say there is a movement happening? What is the evidence that leads you to believe that there is a movement?

MS: Time had a cover story in early 2007 that said "Forget Organic, Eat Local." It is the zeitgeist of the moment. It's just one of the many pieces of evidence that this movement is gathering steam. Everywhere you go in this country you see signs that say "we are a local bank" or "we serve local food" or "we manufacture local jewelry." It is so universal now, cutting across every single political divide. I think this is an important trend in American culture.

It is equally significant that a lot of non-local companies are trying to pretend they are local to take advantage of this trend. McDonald's has put out some posters and newspaper ads that say "Locally Owned" to give you the feeling that maybe they are a local food outlet. Borders now has sections of its bookstore that say "Local Interest." The local economy networks have expanded from zero to fifty networks in six years. Formally, there are fifteen thousand businesses that are members of these networks. But if you counted all of the local businesses in these fifty areas, it's more like a couple hundred thousand. I just saw another list that had networks that are in various stages of formation in another hundred places around the U.S. where there is some form of activity.

We are almost to the point where a majority of the country is now being influenced by these business alliances. It's not quite there yet but given the growth rate of these movements, I think it's not that far off that we'll see that. In my adult lifetime, I have never seen a movement that has grown so fast and appealed to such a broad range of people in this country.

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