For years, Alabama policy-makers focused exclusively upon recruiting big industries and huge retail establishments which drew big headlines. All the while, they practically ignored those businesses already rooted, yet struggling, in our communities. Alabama should abandon these economic development models, rooted in outmoded mid-20th century business theory. Instead, we should shift our policies to meet the demands of the 21st century for economic resilience. Many communities already have blazed the trail for us.
For instance, one community in Wisconsin evidences the benefits of a change in policy. This alternative model for economic development which empowers locally owned businesses reaped great benefits for a local community in Wisconsin.
“Big box stores aren’t evil, but money spent locally tends to circulate more in the local economy. For example, if one spends $100 from a local independent business, about $68 stays in the area. If spending at a chain store, only $43 of that $100 stays in the local economy.”
This substantial difference in local benefit makes common sense. For example, in my hometown Ashland, when I purchase medicines at the locally-owned pharmacy, that dollar I spend will likely be spent locally also. Our local pharmacist will take my dollar and if she needs office supplies, she will buy pens and paper from the local dealer. Or if she needs to renovate her store, she will buy materials from the corner locally-owned hardware store. Or he she need a lawyer (heaven forbid!), hopefully they would come to my office to retain me. With each transaction, the process recreates itself, over and over and over.
For money to be productive, it needs movement, or in economist terms: “velocity.” Economists believe that dollars spent locally double and quadruple the monetary velocity after each use. On the other hand, the reverse is true when money falls into out-of-state corporation’s pockets. First, the money is sent off to Arkansas or New Your or Delaware. Instead of spending their earnings locally, those out-of-state and multi-state corporations typically purchase their office supplies from distant wholesale office supply dealers, buy their hardware from a multi-state chains, and employ Birmingham law firms; all of which hurt our local economy.
We must close these “leaks” from our local economies. These leaks are as dangerous to our communities as a parasite is to our bodies; it saps our communities of its vigor and vitality. Our communities must be willing to develop industries that can supply our local needs, locally.
As evidenced in this article, a bonus which never shows up in a balance sheet from this strategy, locally-owned businesses love and improve their communities.
“He said independent local businesses are the largest employers in communities and contribute the most to community causes and non-profit organizations.”