Looking After Local Enterprise and Life (Part I)

The following was submitted to the local paper as an opinion piece.  It corresponds to the news that the local district council subsidised the very unpopular investment in water bottling by outside interests, utilising our very high quality aquifer water for no charge.  The rationalisation was more ‘jobs and GDP’, and caused a local outrage.  I wrote about it here in reference to the water being our ‘common’.  Hawke’s Bay people are also subsidising the investors in the large, corporate-scale Ruataniwha Dam.  

Alternatives like building the scope of potential of our local farms and economies are dismissed with selective arguments relating to single function ‘efficiencies’.  There are these alternatives of smaller firms and artisans who employ more and benefit life in so many more ways than the corporate agribusiness or dominant crunching mills.  But rather than building our scope, we talk of scale and bringing in the corporate investor; a pattern of preferring the big over the small, without regard to where ownership is seated, or the major benefits of local enterprise.  We are following the example of the US in supporting big business over small local start-ups.  Why?

The article is in two parts.  The first (with slight edits) was presented to the Hawke’s Bay Today.  Part two looks at some of the history, the research that has been undertaken on the benefit of local enterprise, and why it has not had a voice within central and local government policy.

————-

The question of how we as a region encourage a better economy and jobs for our people is not often debated.  Certainly not deeply.  We seldom differentiate.  There is an implicit view that we support new enterprises, but which ones.  I know of artisans who do incredible things with sound systems but lack the start-up capital to take the next step. Who knows what could come of them.  And yet if an outsider comes in and promises a number of low paid jobs by extracting something of ours and ‘compromising’ our commons, the suits are on full display for the photo op.

Ernesto Sirolli, who visited Hawke’s Bay two years ago, challenged that ‘subsidise the big outsiders’ view.  It favours the extractive economy over the creative, with all that comes with that (I’ve previously written about it here). The challenge to what is effectively corporate welfare in the US is growing with various claims that up to $US 450,000 of central and local
government subsidy is being paid for each job created[1]. In the US at least, it has become an industry, and their trends in governance, commerce, environmental and social issues, are very much our trends, just one or two decades in front.

Outside-owned business is treated with open arms and subsidies. Small business and artisanal start-ups are just not as sexy. Perhaps it is about a sense of importance. Is there

a provincial cringe in favour of the well-dressed swank from outside rather than the inspired and head-down artisan why might be considered – quelle horreur – an artist!  Ministers of the Crown come along to complete the perfect picture. You can have a nice lunch.  A large irrigation dam anyone? Let’s not talk about multifunctional alternatives that build the capacity of the whole landscape, economy and community. Small people live there.

The poor positioning of how we promote enterprise is beyond simplistic. We tend to come with spreadsheets from the top instead of recognise the linkages between culture, a quality environment and enterprise; all the social capital, justice and people-centred, small enterprise start-up work.

We have even heard politicians appeal to outsiders with our ‘low wages’, attempting to compete based on lower costs rather than higher quality. They are not lower costs.  Someone always pays, and it is us in lack of hope, the dulling of local enterprise, engagement and thought, and water we cannot drink and in which we cannot swim.

We have also ignored the research on how a community of local enterprise outperforms in every way those communities dominated by a smaller number of outside corporations.

A community blessed with many locally-owned, rather than a few outside owned corporates, has higher median incomes, less inequality, lower unemployment, better community infrastructure, streets, schools, community gathering place, as well civic and social engagement.

The findings are extraordinary. Buying local makes economic and social sense. Encouraging local start-ups makes sense. Local owners are both financially and personally vested in their communities because it is home, not a place and a people far away to be milked for profit.
And our dollars churn around far more as multipliers of value. The economic impact of a locally owned store is between two and four times that of a chain[2].

Local firms are more reliable, they do not take the subsidy money and run; they are more locally accountable; tend to buy local themselves; generate greater creativity and entrepreneurship; and care about the local identity and celebrate diversity and difference. Look at our Hawke’s Bay cafés and bars. Some of them are proudly weird. That’s Austin Texas’ small business slogan; “Keep Austin Weird.”  Portland Oregon as well.  We really ought to steal it.  Albuquerque’s is even better and focused on buying local – “Keep it Querque.”

Why is this not a policy focus of our central and local governments? Why don’t we hear more about it? The pile of research references grows higher, and yet we encourage the big and centralised over the local and smaller.

It is time to embrace and play an active role in encouraging and assisting creative local start-ups and treat them like gold.  Build a vibrant artisanal society. Celebrate the ideas. Make Hawke’s Bay weird.

Chris Perley
Thoughtscapes

Chris Perley is an affiliated researcher at Otago University’s Centre for Sustainability with a philosophy, governance, research, management and policy background in provincial economies, rural sociology and natural systems.

About Chris Perley

============================================

The explanation for why we have chosen to ignore much of this evidence is discussed in Part II to follow – Looking after Local Enterprise and Life (Part II)

This article also relates to my blog on Extractive vs. Creative Economies.

=============================================

[1] http://addictinginfo.org/2014/10/31/corporate-subsidies-cost-americans-456000-per-job/

http://www.forbes.com/sites/taxanalysts/2014/03/14/where-is-the-outrage-over-corporate-welfare/#dae6c8e6881b

http://www.goodjobsfirst.org/sites/default/files/docs/pdf/subsidizingthecorporateonepercent.pdf

http://thefederalist.com/2013/09/30/calculating-the-real-cost-of-corporate-welfare/

[2] The two pioneer studies include [Rural communities] Goldschmidt, Walter R. (1947). As You Sow: Three Studies in the Social Consequences of Agribusiness. Montclair, N.J: Allanheld, Osmun and Co. Publishers, Inc.;

[Manufacturing centres] Mills, C. Wright, and Melville J. Ulmer. (1946) Small Business and Social Welfare. Report of the Smaller War Plants Corporation to the Special Senate Committee to Study Problems of American Small Business. 79th Cong., 2nd sess., Document 135.

They were dismissed by the new emphasis on big is better policy development, and with it research initiatives, until rediscovered in the late 1990s by Dr Thomas Lyson from Cornell University and others. They expanded the research with large scale statistical studies over 3000 US Counties testing the relationships between small businesses and social conditions.

Irwin, Michael, Charles Tolbert, and Thomas Lyson. (1997) How to build strong home towns. American Demographics 19: 42-49.

CM Tolbert, TA Lyson, MD Irwin (1998) Local capitalism, civic engagement, and socioeconomic well-being. Social Forces 77(2): 401-427

Irwin, Michael, Charles Tolbert, and Thomas Lyson. (1999) There’s no place like home: nonmigration and civic engagement. Environment and Planning A 31 (12): 2223-2238.

Lyson, T. A., Torres, R. J., & Welsh, R. (2001). Scale of agricultural production, civic engagement, and community welfare. Social Forces, 80(1), 311-327.

Tolbert, Charles M., et al. (2002) Civic Community in Small‐Town America: How Civic Welfare Is Influenced by Local Capitalism and Civic Engagement. Rural Sociology 67 (1): 90-113.

http://www.amiba.net/resources/multiplier-effect/

http://reclaimdemocracy.org/independent_business_local_ownership_pays/

https://bealocalist.org/benefits-of-locally-owned-businesses/