Many of us watch the stock market with dismay as our investments take a nose dive. Most Americans rather would invest in Main Street than Wall Street, but the current economic system tends toward globalization instead of localization. Local economist and author Michael Shuman points out that "outdated federal securities laws have left Main Street dangerously dependant on Wall Street, and overhauling these regulations turns out to be a hidden key to economic revitalization."
Shuman, author of "The Small-Mart Revolution," cites a recent study showing that small local businesses, which usually start out as sole proprietorships, are three times more profitable for investors than C-corporations, which are large, global corporations. Rising fuel costs and a fall in the value of the dollar are part of the reason for this new trend. For example, small family-owned vineyards in New York can retail wine at or below the costs that large corporate vineyards in California do because of the costs of carting bottles of wine across the country. This is starting to "even the playing field" for small producers.
There is also a growing consciousness among consumers that small businesses really are the backbones of our communities. These businesses spend more of their incomes locally, which creates a multiplier effect, further boosting local economies. They also add "local color" to villages, which attracts tourism, and they encourage walkable communities, entrepreneurship, community building and the revitalization of our downtowns. "Every dollar spent at a locally owned business generates two to four times more economic benefit—measured in income, wealth, jobs, and tax revenue—than a dollar spent at a globally owned business," Shuman says.
Green jobs tend to be locally based, creating a whole new genre of local business. Already, half our economy comes from small local businesses. Factor in nonprofits, such as the one I run, and that figure jumps up closer to 60 percent of all economic activity. As we begin to transition toward services instead of goods, more money will stay in our communities. For example, when we buy weatherization services instead of fuel oil, more of our money goes to the local contractors who do weatherization instead of to the multinational corporations that refine oil.
Local businesses are our future and the only viable economic solution to our current economic crisis, yet very little of our investment dollars are staying locally, at businesses we frequent every day. Instead, all our pensions and 401(k) funds go to Fortune 500 companies. Shuman suggests that simple reforms to antiquated trading laws would allow local businesses to participate in the stock exchange. He says, "One easy reform would be for the (Securities and Exchange Commission) to allow low-risk public ownership of locally owned microbusinesses."
Shuman is suggesting that small companies be able to sell shares to people in their home states, with no one owning more than $100 worth of a single stock. This would lower the risk and spread the opportunity and investment to more small businesses. If we were to enact this reform, trillions of dollars would begin to flow into small mom and pop businesses across the nation. This move would encourage new businesses to reflect the needs of the community shareholders and encourage investors to keep their money within their respective regions.
Unlike the current economic stimulus plan, Shuman's suggestion would cost nothing to implement and would create immeasurable local jobs as investment money flowed toward local entrepreneurs, who would generate millions of new businesses and jobs. The result would be a stronger nation, with a vast network of interdependent local economies. This would be a far more sustainable and stable economic system than our current one, which is dependent upon using up dwindling resources, generating mountains of waste, and intensifying poverty and poor working conditions around the world.