Bottom Up Economic Development

  • factory
Print pagePDF pageEmail page

My wife tells me I should be more positive with my articles. I should write more about good things that are happening. Being a cranky curmudgeon this is not easy to do. Plus the current political situation provides a continuous stream of great negative topics.

The Foxconn giveaway in Wisconsin is an example. But economic development doesn’t require huge tax expenditures to create jobs. There are other ways to create jobs and build economic security. There are many positive stories about local people across the country finding local solutions. These stories show alternatives are possible.

In past articles I have suggested that investing in people is a better way to build a sustainable economy and create jobs than bribing companies with various incentives. Improving the quality of life of local people (including low income people and minority groups) and making local communities better places to live is a better strategy than hoping for a mega-corp savior like Foxconn. There is a growing understanding that bottom up development works better.

The American Sustainable Business Council is a network of businesses and business associations that promote the “triple bottom line of People, Planet, and Profit.” They advocate for a fair, shared prosperity, with appropriate government regulation to produce a sustainable economy. They say,

Programs that favor economic diversity at the local level are better than so-called “business attraction” strategies that aim to attract a large employer to locate in the area. Locally-based growth leads to economies that are more resilient and likely to yield more jobs for the investment made.”

The bribe-them-to-come strategy is expensive and often produces only short term results. When the subsidies run out the company moves on. Not being rooted in the local community or based on local needs or resources they have no reason to stay. This strategy tends to attract opportunists rather than entrepreneurs.

Existing local businesses and taxpayers pay for the subsidized, often competing, new business. The bribe game produces economic “churning” rather than growth. Stealing companies from other communities doesn’t grow the overall economy. It simply moves it from one place to another.

A look at the histories of many major companies illustrates this point. Most successful big companies in Wisconsin (Miller Brewing, Johnsonville Brats, Johnson and Johnson, Wausau Insurance, Harley Davidson, American Family Insurance, Johnson Controls for some examples) are home grown.

They originated as small companies that provided goods and services people needed or wanted. These companies did not come to Wisconsin because of bribes and tax giveaways (although some have since learned to play the bribe-them-to-stay game).

Another problem with the bribe strategy is it favors large business. Good Job First (GJF), a think tank that studies economic development subsidies, says big business gets most of the subsidies and tax breaks.

But small business creates most of our economy and supports our communities. In Wisconsin, and most places in the country, 80% of businesses are “small.” GJF studied 4,200 economic development incentive awards in 14 states and found that large companies received 90% of the dollars.

Bottom-up development strives to build local community well-being and prosperity rather than maximizing shareholder value for absentee owners. This philosophy is sometimes called the “new economy movement” and is described on the New Economy Coalition web site:

We must imagine and create a future where capital (wealth and the means of creating it) is a tool of the people, not the other way around. What we need is a new system—a new economy—that meets human needs, enhances the quality of life, and allows us to live in balance with nature. Far from a dream, this new economy is bursting forth through the cracks of the current system as people experiment with new forms of business, governance, and culture that give life to the claim that another world is possible.

All around us, innovators are building cooperative, ethical, and community-rooted enterprises, reclaiming the commons, and democratizing and reorienting finance. We are finding new ways to share skills and goods, measure success, and meet growing human needs on a finite planet.”

The New Economy Coalition web site lists over 200 member organizations. They include local development projects, consulting organizations, think tanks, and social justice organizations. These groups work to create local jobs programs, worker owned businesses, cooperatives, alternative financing, local food initiatives, and minority and women owned businesses. It is a very diverse movement with many success stories.

Democracy Collaborative is another organization “building community wealth.” Their publication, Cities Building Community Wealth, lists 20 cities with successful local initiatives (including Madison and Minneapolis). These cover a wide range of activities to increase local ownership, create affordable housing, help small business, increase minority businesses, revitalize neighborhoods and expand renewable energy use. These efforts use government assistance (subsidies, tax policy, loan funds, purchasing power, minority contracting requirements, etc.) but, unlike outside companies, keep the money in the local area.

In modern society government plays many roles in the economy. It provides the playing field (laws, courts, equal opportunity, regulation), the public infrastructure (public utilities, transportation, schools), and technical support (basic research, statistics, economic stabilizers like the FDIC and unemployment insurance) needed to support the economy. It also needs to provide services that the private sector does not do well (health care, social services, retirement security). When government does these things everyone benefits. When government invests in people we all win.

Learn more about the alternatives and how bottom up economic development can work at:

  • American Sustainable Business Council, http://asbcouncil.org

  • New Economy Movement http://neweconomy.net.

  • Democracy Collaborative, Cities Building Community Wealth, http://democracycollaborative.org/sites/clone.community-wealth.org/files/downloads/CitiesBuildingCommunityWealth-Web.pdf

  • Institute for Local Self-Reliance, “Key Studies: Why Local Matters,” https://ilsr.org/key-studies-why-local-matters/

  • Good Jobs First, www.goodjobsfirst.org