Traditional economic theory asserts that "bigger is better" when it comes to business. Each year, City, State and Federal governments give $113 Billion to national and multinational corporations in tax breaks, funding and land grants. What do the results of local vs. non-local business tell us about which is better for our communities?

• A study in Austin, Texas revealed that of $100 spent at a national book store chain, $13 remained in the local economy. When $100 is spent at a local book store, $45 remained in the community. This is due in part to the fact that the national chain did not have upper management in their stores, did not use local advertising and media, and did not use local lawyers and accounting firms, whereas the local bookstore did.
  
  
• A San Francisco based study concluded that a shift of just 10% of retail spending toward local business would create 1,000 jobs and keep $200 million in the community. Conversely, a 10% shift away from local retail would mean the loss of 1,000 jobs and $200 million.

Local businesses are a better choice for our communities because they:

• Are rooted in the community and don't move
• Purchase locally, increasing their economic multiplier effect
• Are unique and competitive

What about concerns that smaller businesses fail more often or aren't able to innovate?

• 58% of our GDP is generated by non-mobile businesses and organizations. This doesn't account for our non-market, "gift economy" of care for children and the elderly. If we count these aspects, upwards of 75% of our economy is from local sources right now.
  


• From 2000 to 2001, the net birth rate of small businesses (over failures during that time) was 32,000 - a larger gain than large corporations
  


• 60-70% of new jobs come from small businesses
  


• 13-14 times more patents are filed from small, local business that from large, mobile corporations

Despite the evidence that locally owned businesses are more stable, provide a higher multiplier effect in communities, and provide more jobs in a community, our public policy inherintly favors large, mobile corporations over locally owned businesses.

So what can we do to strengthen our local economy?

 

*The information above is taken from a talk given my Michael H Shuman in Boulder, September 2007. More about Michael and his work can be found on his web site.