By Michael Shuman
Reinventing economic development as if small business mattered
In cities and towns across the nation, economic development is at a crossroads. A growing body of evidence has proven that its current cornerstone—incentives to attract and retain large, globally mobile businesses—is a dead end. Even those programs that focus on local business, through buy-local initiatives, for example, depend on ongoing support from government or philanthropy. The entire practice of economic development has become ineffective and unaffordable and is in need of a makeover.
The Local Economy Solution suggests an alternative approach in which states and cities nurture a new generation of special kinds of businesses that help local businesses grow. These cutting-edge companies, which Shuman calls "pollinator businesses," are creating jobs and the conditions for future economic growth, and doing so in self-financing ways.
Pollinator businesses are especially important to communities that are struggling to lift themselves up in a period of economic austerity, when municipal budgets are being slashed. They also promote locally owned businesses that increase local self-reliance and evince high labor and environmental standards.
The Local Economy Solution includes nearly two dozen case studies of successful pollinator businesses that are creatively facilitating business and neighborhood improvements, entrepreneurship, local purchasing, local investing, and profitable business partnerships. Examples include Main Street Genome (which provides invaluable data to improve local business performance), Supportland (which is developing a powerful loyalty card for local businesses), and Fledge (a business accelerator that finances itself through royalty payments). It also shows how the right kinds of public policy can encourage the spread of pollinator businesses at virtually no cost.
Art Menius on Radical Localism wrote:
"An argument against bringing large corporations to local communities through tax incentives and grants, an approach the author claims is destructive to employment and investment. Shuman (Local Dollars, Local Sense: How to Move Your Money From Wall Street to Main Street and Achieve Real Prosperity, 2012, etc.), a longtime advocate for promoting local business and a former director of the Business Alliance For Local Living Economies, asserts that “economic development today is completely broken.” Citing the 750-fold increase in subsidies for the movie industry over the past decade, the author debunks the myths circulated to support attracting business in this way, and he argues that such deals do not create jobs but rather take more money out of communities than they bring in. He insists that “those who win the investment lose” and that “it’s high time for economic developers to get back to business.” Shuman views local startup businesses as the answer, especially the kind he calls “pollinators.” These measure success more broadly than by direct returns and include significant contributions to their communities and other local businesses. This approach is intended to strengthen a core feature of the current economy. “All companies that matter,” he writes, “are not globally mobile.” More than half are not spreading across the world but are locally owned and unlikely to move. U.S. capital markets do not often invest in local businesses. Self-financing local “pollinators” address this “huge capital market failure.” Shuman believes that planners should focus on the potentials within their areas through the accumulation of the detailed knowledge necessary, and he provides ways to measure opportunities lost and potential foregone."
Ryan Coonerty on The Solutions Journal wrote:
"Shuman begins with a devastating and convincing critique of mainstream economic development, stressing the waste of resources aimed in never ending luring of businesses from other communities at a staggering cost per job created. Then, using his experiences in the field and three dozen interviews conducted in 2014, he dissects 28 examples of pollinators. [...] Thereby combining the theoretical with practical experiences, Shuman builds his case that pollinators, both for-profit and non-profit and usually depending on earned income, can produce sustainable jobs committed to community at little or no cost to taxpayers. [...] This practical, results oriented methodology produces ideas that can appeal to both left leaning progressives and libertarians. That broad spectrum approach provides the hallmark for contemporary localism, a burgeoning movement shaped in many aspects by Shuman’s work."
Margie DeWeese-Boyd on Economic Development Quarterly wrote:
"Unfortunately, investing locally is easier said than done. Economies have grown more complex and globalized. Is it better to buy a table made in Malaysia from your local furniture store or from an Etsy artisan 500 miles away? How does, or how should, a community support a business that exports its products globally? Should we consider the nearby publicly traded company part of the local economy, or part of theWall Street economy? Shuman attempts to create a framework for these kinds of decisions through his six “Ps” of local economic development : Planning (understanding opportunities for local businesses to meet local needs); Purchasing (buy local); People (training local entrepreneurs and employees); Partnership (collaborations of local businesses); Purse (mobilizing local capital); and Public Policy (leveling the regulatory playing field for local businesses). [...] One must give Shuman credit for pointing out the realities of local economies—they are unique, messy, and reliant on a few key leaders, which is not a good combination when competing against relentless and focused mega-corporations and their lobbyists. However, Shuman offers dozens of potential solutions, such as youth entrepreneurship schools, local debit cards, maker spaces, and coordinated local farmer delivery services. With all of these possible solutions, a community should be able to find a strategy or two that will move the needle."
"An evangelist of sorts for the local economy movement, throughout the book Shuman backs his rhetoric with real-world facts, data, and anecdotes. Written by a practitioner, the approach and style of The Local Economy Solution reflects this. The book channels Shuman’s keen interest in providing practical guidance, tools, and resources for other practitioners, including an annotated appendix listing examples of the various kinds of pollinators. What the book lacks in academic tone and nuance, it easily makes up for in grassroots credibility, integrating the values of community development with the assumptions and parameters of economic development. Increasing participation and local control in economic development has justifiably been a rallying cry for community organizers and developers at least since the debacle of urban renewal. By pragmatically arguing for a more decentralized, democratic notion of economy, Michael Shuman effectively puts the community back in community economic development."
- "Michael Shuman on Pollinators, Social Enterprise and Remaking Economic Development" - interview at LocaVesting, 9 January 2016
About Michael Shuman
Michael H. Shuman is an economist, attorney, author, and entrepreneur, and a globally recognized expert on community economics. He is one of the architects of the crowdfunding JOBS Act signed into law by President Obama in April 2012.He’s a fellow at Cutting Edge Capital and Post Carbon Institute and a founding board member of the Business Alliance for Local Living Economies (BALLE). He teaches economic development at Simon Fraser University in Vancouver. He has authored or coauthored nine books, including Local Dollars, Local Sense; The Small Mart Revolution; and Going Local.
Table of Contents of The Local Economy Solution
- Principles; Moving Beyond 'Attract and Retain'
- Planning; Preparing Businesses and Places for Success
- Purchasing; Pumping up the Sales Volume
- People; Training the Talent
- Partnerships; Teaming up to Win
- Purse; Ending Investment Apartheid
- Possibilities; A Million Wishes
- Appendix: 28 Models of Pollinator Enterprises