Rather than chase disloyal firms, a community ought to grow and nurture its own small businesses. Local ownership of the economy means that as a community raises labor and environmental standards, firms tend to adapt rather than flee. Local owners also are more likely to be satisfied with a modest positive rate of return on investment, and less tempted to move to Mexico or Malaysia to maximize profits.
Instead of promoting exports, a community ought to focus economic development efforts on firms that replace imports and increase local self-reliance. A steady process of import-replacement, as Jane Jacobs has argued, reduces a community’s vulnerability to global events beyond its control (like deflations, oil embargoes, or capital flights), pumps up the local economic multiplier (that is, the recirculation of locally spent dollars, which augments local income, wealth, and employment), and increases the flow of local tax revenues that can finance a healthy public sector. Mainstream economists counter that local production for local needs is not cost effective, and point to the proliferation of mergers as evidence that bigger is almost always cheaper. In fact, however, the economies of scale needed to meet most people’s basic needs are dropping. Increasingly, Americans will buy the most essential goods locally: food through community-supported agriculture and farmers’ markets, electricity from local wind-generators and rooftop photovoltaics, basic materials (like wood, plastic, paper, and metal) from regional recyclers, and financial services from well-run community banks.
-Michael Shuman, reprinted from http://www.geonewsletter.org/shuman.htm
