Loving Our Local Economy, Now and Post Pandemic
We’ve learned to love local! I lived in Clintonville for 20 years where local was and still is easy to find – Lavash Cafe, Northstar, Pattycake Bakery, Studio 35, Clintonville Food Co-op (RIP), Weiland’s, two local ACE hardware stores, and much more. I recently moved to Columbus’ East Side and my first priority was to find new favorite local outings – Nazareth Restaurant-Deli for a Middle Eastern fix, Mi Tradition for Mexican fare, 101 Beer Kitchen for a great American gastro pub, movies at the Drexel, and healthy food at the Bexley co-op.
Life is good. Or at least it was…
It didn’t take long after Ohio’s pandemic lockdown to feel the pain of our favorite local businesses, suddenly closed. It’s personal for us and devastating for our local business owners and employees. Yes, many are open for takeout and delivery and we should all support those options. What we miss, though, is being with our friends and neighbors talking face to face, off screen. We’re social animals, and this stay at home living with Zoom, Netflix, and social media is not — we hope — the future. We want OUT, ASAP.
We have time now to probe a little deeper into the mess we’re in. However the re-opening goes, it’s going to be complicated, and probably a bumpy ride. Lisa DesJardins of PBS News Hour reported a recent survey that found that 48% of restaurants that have closed during the pandemic do not plan to re-open. Let that sink in for a minute.
That stat is bad enough, but to add insult to injury, the Federal legislation to get cash to SMEs (Small and Medium-sized Enterprises) has reached only a small fraction of those applying and in need. $340 billion sounds huge but it’s targeting around 30 million SMEs. Like so many individuals and households living paycheck to paycheck, most small businesses live payroll to payroll.
All Paycheck Protection Program funds have now been disbursed to one million SMEs by nearly 5,000 lenders, but far fewer have received their checks. Congress is negotiating another $250 billion package as I write this, but this too will not be nearly enough to satisfy the unprecedented demand caused by the Coronavirus.
There is more bad economic news in that the loss of tax revenues will soon create havoc as cities and towns face budget shortfalls that will require cutting public sector services like schools, first responders, safety net programs, police and fire departments.
The good news is that the Federal government can, as they did in the Great Depression, use the power of the Federal Reserve to meet these unprecedented needs for cash. The Fed bailed out the banks in 2008-09 by using “quantitative easing” to cover trillions of dollars of the banks’ toxic assets. The same approach is being used now to save the economy. The only question is whether there is enough bipartisan political will to invest trillions more to get us through the pandemic.
We all want to return to business as usual, but if we want our local economies to survive and thrive, we will need a New Normal. Our local economies have been, and still are, taking a beating from national chains in every sector of the economy.
Bill LaFayette, local economist and owner of Regionomics, was among the first to notice that despite the growing economy in central Ohio, our locally owned businesses lagged behind many other cities of comparable size. We have greatly improved our “entrepreneurial ecosystem” over the past decade thanks to micro loans from ECDI, new social enterprises fostered by Social Ventures, small loans from KIVA, and Columbus’ small business development centers.
All good. We want a strong local economy. It is often cited that SMEs are the real job creators, accounting for about 2/3 of all new jobs. Further, when we buy local, more of our dollars stay in Columbus – about a quarter of every dollar spent locally sticks around, whereas those same dollars spent at the chains “leak out” of the economy to non-local supply chains, administrative support systems (HR, payroll, advertising, legal, etc.) and of course fees to out of state corporations. A meta-analysis of studies conducted by Civic Economics estimated that if just 10% of our purchases shifted from chain to local in Franklin County, we would retain more than $3 million dollars locally – enough to create 5,000 well-paying jobs. That’s the power of a strong local economy engine.
Shifting our shopping — and our eating, drinking, banking — is one way to strengthen our local economy once we get to the other side of the COVID-19 recession/depression. But that won’t be enough. Fortunately, there is a secret sauce that could be a game changer.
Local investment is the secret sauce. Remember that half the U.S. economy is still local, right? The other half is non-local, often multinational, and it is supported by the Big Banks. This is a generalization, but if you add up all the savings accounts, 401(k)s, IRAs, mutual funds, pension funds, etc. the total is around $30 trillion. That is the capital available to invest in our economy, and you probably won’t be surprised to learn that almost all of it is being invested in Wall Street, with only a trickle being invested on Main Street.
Now imagine if we decided to move that needle of 99% Wall Street investments in the direction of Main Street? It won’t happen overnight, but if around $15 trillion dollars — half of what is going to Wall Street — were being invested locally we could revitalize our cities and rural communities. We could invest locally in infrastructure projects, renewable energy, affordable housing, health care facilities, and more to create jobs locally, and make more tax revenues available to fund local and state government services.
This shift is not mere wishful thinking. The seeds for such a shift have been planted by bottom-up movements that get very little media treatment, most likely because their recommendations and policy proposals will change the status quo. That is precisely why right now, in the midst of the crisis we face, is the right time to think out of the box. We must consider new approaches to reset our local economy in order to create a New Normal that will strengthen the resilience of our communities when faced with future disruptions.
Here is sage advice from David Korten, economist, author of Agenda for a New Economy, Board Chair of Yes! Magazine, co-chair of the New Economy Working Group, founding board member of the Business Alliance for Local Living Economies, and much more:
“These are challenging and frightening times. As we respond to the Coronavirus emergency and the immediate needs of the people and communities impacted by it, let us also keep in view the systemic needs and possibilities that crisis exposes. Despite the trauma all around us, let us embrace this moment as an opportunity to move forward to create a better world for all.”David Korten
Below are more organizations and thought leaders who are leading movements and implementing new strategies for investing in our local economies. They deserve the attention of our local civic and business leaders in Columbus and Central Ohio:
- Michael Shuman is an economist and author who has led the local economic development movement for two decades. His forthcoming book, Put Your Money Where Your Life Is: How to Invest Locally Using Self-Directed IRAs and Solo 401(k)s, is the latest of his many guides to local economic development. Shuman is affiliated either formally or informally with all the organizations listed here.
- Cutting Edge Capital is leading a movement that is bringing new capital – by directly engaging more people as investors – to the new economy – an economy that is resilient, just, and sustainable. The CEC team uses a variety of strategies including DPO (Direct Public Offering) for Main Street instead of IPOs for Wall Street.
- Mission Markets operates a technology platform for the new category of Impact Investing, which aims to generate specific beneficial social or environmental effects in addition to financial gain. Think of it as a subset of Socially Responsible Investing.
- Public Banking Institute is leading a movement to create a “public option” bank to make loans capitalized through various state or local government revenue streams. The state of North Dakota has operated a successful public bank for 100 years and offers local banking services through community banks and credit unions. PBI is the leading advocate for public banking initiatives actively being pursued by both progressives and conservatives. 30 states have proposed legislation in support of publicly-owned banks, and over 50 organizations are promoting public banks.
- Local Futures is led by Helena Norberg-Hodge, a leading advocate for economic localization as the antidote to the excesses of economic globalization. She is the author of Local Is Our Future, and producer of the award winning film, The Economics of Happiness.
- Institute for Local Self-Reliance is co-led by Stacy Mitchell, author of Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses. ILSR leads multiple initiatives that address local energy, local broadband systems, local banking, et al
- Economic and Community Development Institute (ECDI) is Ohio’s own nationally recognized resource for their leadership in providing micro loans to entrepreneurs. ECDI offers the Invest Local Ohio program that allows anyone with a minimum of $1000 to contribute to the ILO fund and earn 2% interest (3% if invested for 5 years). Every dollar invested goes to Main Street entrepreneurs and small businesses in Ohio. Move that CD or mutual fund that invests in Wall Street to ILO and be a part of the shift to local investing.
Chuck Lynd is a Board member of the Ohio Sustainable Business Council, founding board member of Simply Living, and former leader of SOLE, the Support Our Local Economy Coalition.