Community Allies: The Virtue of Locally-Owned Business

Bruce Nesmith is a longtime Strong Towns member and blogger at Holy Mountain. This essay is republished from his blog with permission.

The Coffee Shop near Loyola's campus. Within a block are a Starbucks and two Dunkin Donuts.

The Coffee Shop near Loyola's campus. Within a block are a Starbucks and two Dunkin Donuts.

As Cedar Rapids prepares to welcome two more strip malls on the edge of town, and one of our malls announces a new franchise tenant, it's instructive and inspiring to hear evidence that the most potent tax-gathering areas in towns of any size are downtowns and Main Streets, and that locally-owned businesses contribute far above their weight when it comes to developing strong communities. Those messages were crisply presented by Ellen Shepard in a talk Friday at Loyola University's Center for Urban Research and Learning. Ms. Shepard is the founder and CEO of Community Allies, which works with communities to develop organizations and leadership, facilitate community engagement, and "to grow stronger from within." Prior to that she headed the chamber of commerce in Andersonville, a neighborhood on the north side of Chicago.

I said in an early piece for this blog that I believed local businesses like Brewed Awakenings Coffeehouse  were more valuable to the city than national chains like the Caribou Coffee a block away. But I didn't have the evidence to tell me whether that was intuition or prejudice. Shepard presented a plethora of evidence from recent studies to back up that intuition:

  • A 2005 study in Andersonville by Civic Economics found of every $100 spent at locally-owned businesses, $68 stays in the area, while $32 buys supplies that must be imported from elsewhere. Of every $100 spent at a non-local business, $43 stays, $57 leaves. She used the example of Starbucks, "a pretty good chain" in terms of how they treat their employees, and one that doesn't demand subsidies or infrastructure, but the corporation uses one firm for accounting and one law firm, and one graphic artist, and those are probably not located in the town where you're patronizing Starbucks.
  • A study of businesses in Lane County, Oregon, found the cost to government of a job produced is many times larger for non-local than for local businesses.
  • Old Pasadena, California (local businesses, traditional development pattern) outperforms New Pasadena (national chains, suburban development pattern) 2-1 in sales tax revenue.
  • A relatively high ratio of firms-to-workers in a town correlates with better economic growth (Harvard Business Review, 2010) and per capita income growth (Economic Development Quarterly, 2011).
  • A study by the University of Leeds found increased imports of consumer goods in Britain had created a 38 percent increase in greenhouse gas emissions during the period studied.
The solutions to many of our most entrenched problems are likely to come from the bottom up not the top down.
— Ellen Shepard

Shepard spoke on the eve of the 2016 U.S. presidential election, but didn't refer to it at all; in fact, she argues, "The solutions to many of our most entrenched problems are likely to come from the bottom up not the top down." She urged people to "go to our communities, to our local elected officials, and to our landlords to champion locally-owned small businesses." In practical terms this means having:

  • access to capital
  • a level playing field i.e. governments should stop favoring big corporations through subsidies, infrastructure and awarding contracts
  • laws against monopolies enforced
  • laws that allow cooperative ownership of real estate and community investments (While somewhat off topic, she also suggested the effects of gentrification also could be mitigated by community land trusts which, if formed early enough, could buy up properties to control the rise in rents.)
  • easing business licensing, permitting and zoning, which are nearly impossible in Chicago due to the strong effect of political influence

I would add that citizens need to insist on more long-term thinking from their governments and less emphasis on instant results. (See this article by Sarah Kobos where she writes, "Our craving for “new” tax dollars combined with cheap land has resulted in a misguided 50-year habit of continuous greenfield development"), and in their capacity as consumers to consider the destructive impacts on their communities of choices based on price, habit and convenience.

I'm not opposed to national policies like minimum wage laws, and I am not opposed to seeing Donald J. Trump's bilious campaign get decisively defeated, but I think this community-based approach could go much farther to develop strong, inclusive local economies that would in turn help us face other seemingly intractable 21st century issues like climate, energy, diversity and government finance.

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(Top photo by Ian Baldwin)

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