Communities Should Take Charge of Their Own Economic Development
Image via Unsplash.
It's not new news: Big banks, developers, and chain retailers are pushing out mom-and-pop shops and small-scale developers, and they've been doing it for years. While capital infusion, better housing options, and job growth are all positive aspects of development, oftentimes existing communities are treated as collateral damage on a path towards profit. But communities should be the ones determining their own economic development.
The Impact of Small Businesses on Communities
We know that small business has a powerful impact on communities. Holistically, local businesses tend to reflect the unique nature and tastes of a community, so a city, neighborhood, or single downtown block filled with local businesses will provide a greater sense of belonging than one filled with chains (or with empty storefronts). Local businesses support thriving economies: a dollar spent at local businesses is circulated back into the local economy at 3x the rate compared to dollars spent at a larger chain. According to AMIBA, 48% of revenue at local business flows back to the community.
Large companies are not always unfriendly to local economies. In fact, a large retailer, manufacturing plant, or headquarters can oftentimes bring excellent, high-paying jobs to a region. They can also help move tastes to the mainstream, creating opportunities for other small businesses. Starbucks, for example, influenced general consumer preferences for coffee. Whereas, decades ago, consumers were happy with a watered-down styrofoam cup, those same consumers now expect higher-quality brews accompanied by exceptional customer service, and a clear explanation of where products come from. This has given rise to an entire generation of craft coffee roasters like WeHa and local cafes who cultivate a customer base of so-called "coffee aficionados." In another example, Sam Adams played a large part in raising the quality standards of beer. While still largely considered a craft brewery despite its size, this Boston-based brewery has helped shape the consumer tastes that have led to the successes of a growing number of microbreweries, such as the Ferndale Project. In addition, they continue to support local businesses through lending partnerships.
Despite the positive influence that larger businesses can have on both a micro and macroeconomic level, big business and big banks have a ton of power over local communities and, unfortunately, not in a positive light. It will take a vested effort to return that power to actual people.
The Dangers of Gentrification
An influx of capital into a previously underserved community can look good at a surface level: it can provide appealing housing, drive consumers to new retailers, and attract future investment. However, big developers without ties to local neighborhoods can negatively impact existing populations, leading to displacement. Usually, gentrification occurs when more affluent people move to or become interested in historically less affluent neighborhoods. This is clearly not only a class issue; with this country's history of egregious discrimination and redlining, gentrification almost always impacts minority and immigrant communities. When more affluent populations move into less affluent areas, landlords increase rent prices, forcing out lower-income residents. An article by Emily Chong in the Georgetown Journal on Poverty Law & Policy explains this concept well:
During gentrification, poorer communities are commonly converted to high-end neighborhoods with expensive housing options such as high-rises and condominiums. As property prices increase, the original residents of the neighborhood are forced out in a variety of ways. First, with an increase in the prices of buildings, the gap between the price of the building and the income that the landlord gets from renting the building grows bigger; landlords thus increase rent prices, which forces out the low-income residents. As building prices continue to increase, the problem exacerbates because it becomes even more profitable to convert these apartment buildings into non-residential areas. Additionally, since investors can earn more money from selling buildings, real-estate dealers have less incentive to improve the buildings. The real estate dealers instead sell the buildings at higher prices. This cycle of rising building prices continues until only large and well-financed investors are able to continue. Because of the potential for large profits from the conversion of ordinary living spaces to high-rise or office buildings, unscrupulous landlords have used immoral means to intentionally displace low-income residents from rent-controlled areas.
The displacement of diverse, lower-income populations systematically diminishes opportunities and directly benefits large developers and wealthy (and usually white) individuals.
Additionally, when real estate developers build in communities without the input of the community itself, they bring in retailers whose services and goods may not be needed. If communities demand specific services, shouldn't there be relevant supply to fill in the gaps? The idea of small business as a driver of local economic success is not new. Jane Jacobs wrote in her 1961 book, The Death and Life of Great American Cities:
It grows out of people stopping by the bar for a beer, getting advice from the grocer and giving advice to the newsstand man, comparing opinions with other customers at the bakery and nodding hello to the two boys drinking pop on the stoop…hearing about a job from the hardware man and borrowing a dollar from the druggist…“Most of it is ostensibly utterly trivial, but the sum is not trivial at all. The sum of such casual, public contact at the local level…most of it fortuitous, most of it associated with errands…is a feeling for the public identity of people, a web of public respect and trust, and a resource in time of personal or neighborhood need. The absence of this trust is a disaster to a city street.
While Jacobs' description of a community driven by local commerce may sound Rockwellian, the concepts of local trust, diversity, and empowerment are still relevant. Main Streets that accurately represent the needs and backgrounds of its citizens strengthen local economies by keeping revenue, taxes, and wages local, and improve quality of life for residents by maintaining culture and a sense of local pride.
The Fight for Main Street
In the previously mentioned article from Georgetown Law, Emily Chong writes that "if there is no widespread displacement, and the shifts in the neighborhood are carefully planned through with community input and involvement, gentrification can be a good thing for the community, increasing socioeconomic, racial, and ethnic integration."
In the Upham's Corner neighborhood of Boston, officials and community members are hoping to do just that. According to a Boston Globe article, "The city and its partners are trying to act preemptively, acquiring property before the private real estate market pushes prices too high. The city aims to redevelop the properties based on recommendations from residents." This model has made room for arts and cultural organizations, and even a community-focused restaurant that raised capital through Mainvest. It's allowing current residents to remain in their homes while filling storefronts retail establishments and restaurants that not only represent the life and culture of residents but funnel revenue and investment into a previously underserved community. Projects like these are living proof that profit, economic development, and community can exist simultaneously.
How can we make a difference?
Given the power that big banks and developers have, it can seem daunting to take back Main Street. Support small business by shopping local, sharing small businesses' content across social media, and participating in local elections. These are all ways to shift market power back to the community. A thriving boutique with strong community ties is much less likely to be replaced by an Ann Taylor; a successful butcher shop with a line out the door is less likely to be taken over by a Whole Foods.
Furthermore, through Mainvest, you can petition for certain businesses to launch in your neighborhood and encourage local entrepreneurs to take on the challenge, rather than a multinational corporation. You can also invest in new and existing local businesses, providing them the capital to maintain staying power in a world of CVS and Shake Shacks.
Cover image via Unsplash.
Nick Mathews (CEO) and his team at Mainvest are helping to rebuild the American Dream, one small business at a time. An expert in marketing and operational strategy, Nick led the team that launched Uber in Boston back in 2013. While launching Uber in new markets, both suburban and urban, he experienced firsthand local challenges around economic development. He founded Mainvest in 2018 with the goal of empowering communities to determine their own economic development, utilizing new regulations and novel investment vehicles to align incentives between local community members and small businesses.
Entrepreneurship makes Main Street go round, but those working in the field have to remember that building owners are entrepreneurs, too, and they should be getting a lot more attention.