michael shuman on living economies

    I went and heard Michael Shuman speak this evening. (Scroll back to Monday’s post to find out who he is, in case you don’t already know.) I’m tired, but I wanted to pass along a few highlights.

    • In addition to being an attorney, author and economist, Michael Shuman is an investor in a chicken farm. He feels that, with the rising awareness of bird flu, people are going to be more cautious about the poultry they eat, and there will be more of a niche for smaller, local providers. He also looked at the numbers and saw that people in his area were eating millions of chickens, when none were being raised locally. They were all being shipped. With the rise in oil prices, he felt that there might be an opportunity to get into the business.

    • He outlines two visions of capitalism. The first, he calls TINA. TINA stands for “There Is No Alternative (to the global economy)”. The most high-profile practitioners of this school of thought are the economic developers who are intent on luring large corporations to their region. He calls the opposing view LOIS. I don’t recall exactly what LOIS stood for, but the L was for “Locally” and the O was for “Owned.” He showed Jane Jacobs’ image at this point in his slide show.

    • His organization is BALLE (Business Alliance for Local Living Economies) now has about 40 local chapters, one of which is Ann Arbor’s Think Local First. The “think local first” campaign, which they BALLE initiated, was deliberately non-confrontational. They didn’t roll out a “Shop Local” campaign, for instance. He doesn’t want to push people, just to make them aware of their options.

    • He says that he’s not “anti” anything. He sees going after Wal-Mart, for instance, being a losing battle. He’s of the opinion that our time is better spent making the case as to why small, locally owned business is better, healthier, more sustainable, etc. The rest, he thinks, will follow. (He thinks that Wal-Mart will eventually collapse. Shipping products 15,000 miles in the age of peak oil isn’t going to work.) Healthy towns, in his opinion, will make big box retailers irrelevant.

    • He doesn’t have much use for people in the field of economic development who strive to attract and retain large companies. Tax abatements, he says the evidence shows, don’t work. According to his research, when tax abatements are offered to lure large companies, the jobs created usually end up costing on the order of $65K a piece. Jobs at small, local companies, in comparison, can be created for a fraction of that cost, and they’re more likely to last.

    • People in economic development, in his opinion, take small, local companies for granted. They just assume that they will stick around regardless of how they’re treated. Big companies, however, have no loyalty. To make his point, he contrasts the Green Bay Packers football team with other professional football teams, that are always threatening to leave the cities in which they reside if they aren’t given new stadiums and tax breaks. The Packers are different in that they are primarily community owned. They aren’t going to go anywhere. They’re more stable. And, as he points out, they won’t pick up and move when the state votes to raise the minimum wage, or something else along those lines. They will adjust and adapt. There will be no “catastrophic departure.”

    • Large companies have no local face. There are no local owners to be influenced by community values. There is no one to shame.

    • All communities should strive to be self-sufficient in the areas of food, energy and manufacturing. And we should help one another to achieve that goal by sharing best practices, etc.

    • Economic multipliers. A study was done recently in Austin which showed that $100 spent at a Borders bookstore led to $14 being re-spent in the local community. That same $100 spent in a local bookstore, however, would lead to three times as many dollars being spent locally. (Locally owned stores, after all, have local management, local bookkeepers, and local attorneys, all of whom spend money in the community. They also buy advertising on local radio stations.)

    • A recent Iowa State study on the projected economic impact of ethanol plants being built in the state showed that the more locally-owned a plant was, the more jobs it would ultimately create.

    • Small, local companies lend themselves to “smart growth” (the practice of zoning in such a way as to encourage many kinds of structures and businesses in a confined area, as opposed to using zoning to push different kinds of businesses away from one another, a practice which requires more unnecessary travel) because of their scale. A big-box retailer, in other words, can’t fit as seamlessly into a neighborhood as a small mom and pop store.

    • Tourism depends on uniqueness, and several towns are losing any uniqueness they once had. Everything is becoming homogenous and the places that aren’t are really standing out.

    • You cannot attract the young, entrepreneurial types in Richard Florida’s “creative class” if your location is not unique and exciting.

    • Our economic developers would have us think differently, but most business is done by small, local companies. 80% of the economy is local, but our economic developers focus on the other 20%. (They have it backward.)

    • And, contrary to common wisdom, small businesses are competitive. They produce 14% more patents than large industry, and there are only very few areas that they aren’t involved in.

    • Retail is only 7% of small business. We look at Wal-Mart and say that it’s killing small business, but that’s not true. It’s affecting retail, and, even there, it’s not as bad as we think it is.

    • In a year, state and local entities hand out $50B in tax abatements and incentives to attract and retain large companies. The federal government spends another $63B. And it’s not getting us anything.

    • There are systematic biases against small business in the American system. Not only are we funneling billions of dollars into large enterprises each year, but we have tax laws that encourage large businesses to leave the country. We also have a system where local stores have to pay sales tax, but online retailers like Amazon do not. Worse yet, we’ve stopped prosecuting films guilty of antitrust violations. We’ve also knocked small businesses out of the investment markets, making it difficult and expensive for them to raise capital… In spite of this, however, small business is only down 3% this last year. That shows incredible resilience.

    • People value local. That’s why big companies try to portray themselves as such… He gives the example of a large multi-national bank that brands itself “the world’s local bank.”

    • The cost of oil is rising and people will be driving less. This will force commerce back into historic town centers.

    • We shouldn’t be attracting businesses. “Whenever you hear someone in economic development talk about attracting business, warning buzzers should sound.” They should be teaching entrepreneurship, especially to the youth in the community, instead.

    • We need more markets and bazaars. We need businesses coming together to make an exciting shopping experience. (self-serving note: Remember the Shadow Art Fair is December 1 & 2.)

    • Direct delivery could be a good thing for locals. People wouldn’t have to wait a day for Amazon if a local delivery service could get a book to someone in a few hours. He gives an example of a organic food delivery service that seems to be doing quite well.

    • He’d like to see more co-operatives, like the one that ACE has formed in the hardware space. Other areas of the economy should gravitate toward similar models, which allow for greater leverage with suppliers.

    • We need to get the word out that buying local not only makes a local economy healthier, but is often less expensive. Mortgages through credit unions are generally less expensive than though national lenders. Likewise, studies have shown that, on average, prescriptions filled at small, local pharmacies are less expensive than those filled though national chains.

    • There are other things being tried. Bellingham, WA puts out an annual book called “Where the Locals Go,” which contains over $6K in local coupons. Sante Fe has local debit cards where those using them get discounts at local stores.

    • Look for “leakages” in your community. What are you importing, and can you do it where you are instead? (I laugh at repeated use of the phrase, “meat leakages.”)

    • Example of an area getting their school district to use local dairy products, and the impact that this has.

    • Some communities are teaching their entrepreneurs how to use online tools and how to maximize their effectiveness with Ebay.

    • He wants for “unaccredited” local investors to be able to put money into local companies. “Right now, we let people gamble,” he says, “but we don’t let them invest easily. It’s ridiculous.” He currently has plans to offer locals stock in his chicken business. He’s trying to find a way to make it happen. Securities law should change to make it easier.

    • The community of Pavell, Wyoming sold local stock door to door to raise the money necessary to open a community store.

    • I will edit this later. Right now, I need to sleep.

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      21 Comments

      1. mike_1630
        Posted November 16, 2006 at 3:14 am | Permalink

        Interesting stuff :) I think I’m going to use “the google” on this guy.

      2. dorothy
        Posted November 16, 2006 at 8:30 am | Permalink

        interesting stuff indeed. this guy may have something. i live in a tiny little town with a lot of amish nearby. the local grocery store buys amish products–vegetables, baked goods and meats. people come here from all over to buy local items and in the summer roadside stands do a whopping business. people come in on busses from pittsburgh to shop locally. furniture shops also are popular. the only thing is, no ordinary person contributes to this—only the amish.

      3. murph
        Posted November 16, 2006 at 8:37 am | Permalink

        “I don

      4. be OH be
        Posted November 16, 2006 at 8:44 am | Permalink

        Sounds like it was a really interesting presentation. I’ll keep my eyes open for a Shuman appearance in my area.

        dorothy, do you happen to live near the Sugarcreek/Millersburg area in Ohio?

      5. egpenet
        Posted November 16, 2006 at 8:53 am | Permalink

        I have been “harping” on WE for a long time … obviously Council thinks the “big” ideas are Water Street and finding a couple “factories” to fill the space at Visteon and what’s'its on Forest across from the Brewrey. No … it’s WE.

        I was struck by your carefully garnered list of points … each one could be linked to one or more creative ideas WE could implement … WITHOUT tax abatements.

        I’d like to know just how creatively and excitedly local real estate agents are presenting the “downsizing” and other “opportunities” of buying homes in Ypsilanti, which, contrary to A2 … is becomming THE only neighborhood-based community in the county.

        I’d like to know how we go about REVERSING the financial damage the city has done to itself with Water Street.

        In a slightly related way … we should begin planning a “going away” party for David Kircher. Any ideas?

      6. DM
        Posted November 16, 2006 at 11:08 am | Permalink

        There is an economist, W. Brian Arthur, that developed something called the “Law of Increasing Returns.” His simplification of the Law was stated as ” Them that has gets.” He is associated with the Santa Fe Institute, which has a branch office at the University of Michigan- due mostly in part to the tenured mathematician John Holland and his work on edge of chaos / complexity.

        The idea of “Lock In” I think can be applied to the economy of small cities as well as technology. The idea of community owned franchises seems like the best starting point with the goal of lock in. The Green Bay Packers seems like a good example.

        It all seems to come down to a delicate balance of altruistic and selfish behavior – at the personal level, the biological level ( Richard Dawkins ), and the level of social “organisms”/ colonies/ communities/ societies/ leviathans. I’ll be so brave as to say that I believe that social ills are the result of an imbalance between these two poles.

        Maybe you could set up a SimsCity Ypsilanti to use as a model for economic development? There is, after all, a SimCIty Detroit 1972 that attempts to solve the urban decay problem.

      7. Lisa
        Posted November 16, 2006 at 11:09 am | Permalink

        Thanks, Mark – that’s a great summary and I’m glad you made it there! I’ve seen Michael a couple of times, and learn something everytime I see him. I love the local debit card idea – I talked to the folks in Santa Fe at the BALLE conference, and I’m kind of waiting for them to work out the kinks in it before pursuing it here. We talked strategy with Michael over beer afterwards, so we’ll see.

        We have many many Small-Mart books, if somebody wants to read more. Think Local First is selling them at events and by credit card for a few dollars less than retail – email me if you’re interested.

      8. Dr Cherry
        Posted November 16, 2006 at 12:09 pm | Permalink

        You all may be interested in:
        http://www.ithacahours.com/

      9. ol' e cross
        Posted November 16, 2006 at 12:58 pm | Permalink

        The answer is right here in this thread!

        We need to all chip in and collectively buy an NFL team, say the New Orlean’s Saints, and turn the Visteon plant into the Maynard Dome.

        Vendor contracts will be given exclusively to local brewers, bakers and hot dog makers who use food harvested in county farms. VG Kids and Maggies Organics will make the team uniforms and merchandise. Kircher will be in charge of maintaining and renting luxury boxes. And, all our players will be recruited from Ypsi High and EMU. Free foot ball shavers will be handed out to the first 50,000 attendees at every game!

        (Or, we could realize similar impact if we could convince EMU to at least give preference for local service providers…)

      10. ol' e cross
        Posted November 16, 2006 at 12:58 pm | Permalink

        The answer is right here in this thread!

        We need to all chip in and collectively buy an NFL team, say the New Orlean’s Saints, and turn the Visteon plant into the Maynard Dome.

        Vendor contracts will be given exclusively to local brewers, bakers and hot dog makers who use food harvested in county farms. VG Kids and Maggies Organics will make the team uniforms and merchandise. Kircher will be in charge of maintaining and renting luxury boxes. And, all our players will be recruited from Ypsi High and EMU. Free foot ball shavers will be handed out to the first 50,000 attendees at every game!

        (Or, we could realize similar impact if we could convince EMU to at least give preference for local service providers…)

      11. Lisa
        Posted November 16, 2006 at 2:26 pm | Permalink

        What would we rename the team – the Maynard Munchkins? The Local Llamas? The Ypsilanti Yaks? The possibilities are endless…

        We could also rent the dome in off-times, solving the ‘huge dome used only 10 times a year’ land-suck. The idea is growing on me.

      12. Ted Glass
        Posted November 16, 2006 at 3:09 pm | Permalink

        I can see the dome of the stadium, like a giant newly-shaved testicle, glistening in the brillaint sun of a reborn Ypsilanti. My eyes are tearing up.

      13. DM
        Posted November 16, 2006 at 3:17 pm | Permalink

        My two cents worth regarding Ypsi’s economy:

        First, I am aware that things in Ypsi are a bit out of balance. One of the two 800 pound tax payers took his toys and left, and the property owners are expected to pick up the slack. I get it. It isn’t pleasant.

        However, trying to reinvent Ypsi as a distorted reflection of Ann Arbor seems like sibling rivalry. A lot of Ann Arbor businesses are directly related to either research and development at the Univeristy or the brains graduating from the place. And the service oriented businesses there are there because of the disposable income of the students and the high paid brains coming out of U of M. Ann Arbor as a unit has many connections to other cities through trade and research as well. EMU, although it is a fine universtiy, it is not dealing with billion dollar budgets each year and it is not drawing larger tech companies to snuggleup close to them. And all the goods and services businesses that magically appear when wealth is begging to leave the confines of many leather billfolds are not there as a result. One could argue that most of them are unnecessary anyway.

        Ypsi ( and SE Michigan in general ) has a few things that make it unique that I believe could be the seeds of significant change. There are many, many skilled laborers in SE Michigan that are underemployed or unemployed. Machinists, pattern makers, model makers, metallurgist, tool and die specialists, painters, furniture makers, welders, etc. There is also an enormous amount of unoccupied industrial space as well as idle equipment in the area. Most of the companies that employed them were doing OEM or aftermarket equipment for the auto industry. Although the large contracts are going to China, there is still a huge number of niche markets that require smaller production runs of parts – Architure/ Construction projects, Aerospace, consumer outdoor equipment, etc.

        I really believe that the skilled labor there is a goldmine and is the best bet for bringing in out of state cash as well as better sense on an individual level as well as a communal level of autonomy. There seems to have been this mindset for a number of years now that developing and repackaging information is the best way to fortune. And it has been. But someone still needs to grow the food, make the keyboards, change the oil, distill the petroleum, monitor the dynamos, maintain the transmission lines, make the trillions of parts and pieces that make up our built environment.

        Out here in Seattle, there are a lot of small job shops that years ago did work almost exclusively for Boeing. During some of the bust periods, they either folded or found other industries to do production runs for. There are still hundreds of these small shops around and they are all doing very well. I use about a dozen of them regularly for my projects – metal etchers, woodworkers, welders, machinists, powdercoaters, laser and waterjet cutters, auto finishers, as well as local hardware stores, lumberyards, metal and plastic suppliers, etc.

        The state tax laws out here favor doing out of state business for manufacturing. I pay no taxes on my gross income for manufactured goods sold out of state as well as no state sales tax on the ingredients of my products. I don’t know how things are set up out there, but it looks as if an unfair burden is placed on homeowners.

        The city rules regarding the use of a home for business purposes here are encouraging too. I am allowed to use my home to run my business and can employ 1 person. Pretty fair.

        Assuming I were to try and move my business to Ypsi, I am not sure what the advantages would be. Questions I would ask would be:

        - Can I run my business out of my garage? How many people can I employ at my house?

        - What are the city taxes on businesses? State taxes? For manufacturing as well as professional services?

        - What is the inventory of commercial/ industrial space like out there? What does the zoning allow and not allow?

        - What kinds of small job shops are around the area? Material suppliers ( metal, plastic, wood )? If outside of a 10 mile radius, do they offer delivery to the area?

        Identifying a network of existing job shops as well as finding existing idle talent and helping to set them up in Ypsi would go a long way. And rather than trying to solicit large companies to move to Ypsi, helping small job shops find out of state contracts would be good also. Loosening land use codes and strengthening material and labor safety would be helpful also.

        And to add another layer on to that, putting this all into historical context makes it even more exciting. The job shops and assembly plants could expose their process to the public and turn it into a spectacle, not unlike a brew pub but instead showing the process of painting, stamping, forging, machining, etc. All the workers are serving a dual role of laborer and actor. It could be like a functioning Henry Ford Museum / Greenfield Village and attract tourism dollars. I know it sounds silly, but consider that HFMGFV is second only in annual attendance to the Smithsonian. That would solve the problem of secondary goods and services businesses because you would have people visiting a working city for recreational purposes and bringing in their money to spend on food and goods ( like furniture – an IKEA where all the furniture is not only made locally, but you can watch them make it. )

        I’ll add that I think Mark’s Shadow Art Fair is a great idea. I would try to add an exposure of the process to it though.

        I am now stepping off my soapbox.

        Dave

      14. DM
        Posted November 16, 2006 at 3:32 pm | Permalink

        One last thing. This has been done before. Granville Island in Vancouver, BC is a fantastic example. It is a small island under a bridge south of downtown. It was all industrial years ago. A number of the businesses closed over the years and the city did an adaptive reuse program there to bring life back to the place

        There are a few heavy industries there – a cement manufacturer for example. There are a number of smaller manufacturers there- a folding kayak manufacturer ( Feathercraft), a forge that makes tools, a couple of wooden boat makers. There is an art school, a performing arts center, an indoor/outdoor public market with many stalls of fresh produce ( similar to Pikes Place in Seattle ), there are a number of galleries, book stores, restaurants, model makers, professional offices, parks, etc. also.

        The park on the south east side connects by a path to a residential neighborhood.

      15. ol' e cross
        Posted November 16, 2006 at 3:37 pm | Permalink

        Dave makes a good point. I think we should buy the Seattle Falcons.

        (No, I really don’t have anything intelligent to say.)

      16. ol' e cross
        Posted November 16, 2006 at 3:37 pm | Permalink

        Dave makes a good point. I think we should buy the Seattle Falcons.

        (No, I really don’t have anything intelligent to say.)

      17. DM
        Posted November 16, 2006 at 4:22 pm | Permalink

        OEC-

        If it were my choice, I’d give you the Seahawks as well as the Sonics. All they do is make traffic worse and, in the case of the Sonics, whine about wanting new digs. I’m partial to the Mariners, even though my property taxes went up to make them a nice new home with a retractable roof. I could give a shit less about football though.

        If you want to build either of the stadiums, I can give you marked up design development sets for both Safeco Field and Qwest Stadium. I found them in a dumpster in the Pike Place Market. No kidding. You’d have to hire someone to design a shiny testicle lid for it though. It is an open arena.

      18. Ken
        Posted November 16, 2006 at 8:57 pm | Permalink

        I don’t believe those plans exist!! I was supposed to get some copies of them when I was out there.

      19. DM
        Posted November 16, 2006 at 10:46 pm | Permalink

        aw, come on now kenner. I showed them to you. I have two sets of both. I’m running out of other architectural sets. I use them for packing my crates. The stadium drawings are getting closer to becoming garbage, so if you want them you better act fast. Money talks mister.

        It’s funny that project managers gave me complete sets when all I usually need are the floor plans, site/ landscape plan, and occasionally wall sections and a few elevations. Most of the drawings I get now are in a pdf or dwg format. The days of free crate stuffing material may be gone…

      20. mark
        Posted November 18, 2006 at 11:25 pm | Permalink

        It makes me sad to hear that your digging though dumpsters, Dave. I’d believed you a few days agon when you told me that everything with the business was going well.

        And thank, everyone, for all the thoughts on this thread. The subject certainly deserves quite a bit more attention.

      21. Sarah
        Posted March 23, 2008 at 12:57 am | Permalink

        Mark, thanks for your summary! And, thanks for the great website. I just heard, I think, a very similar speech by Michael Shuman on Alternative Radio. If you all would like to hear the speech, you can get it on their website (although I’m having trouble getting it to play on my computer.)

        Michael Shuman quoted something at the end of his speech and I would like to find the quote. Unfortunately, I don’t know a lot about the quote, except it had to do with the value of community, and ended with “give me community!” The other part included something about the dullness and chains of solitary life. I don’t even know the person’s name! Can anyone help? Please contact me if you have ideas. Thanks.

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