Independent Business Archives ⋆ Reclaim Democracy!

The Multiplier Effect of Local Independent Business

January 3, 2021 by Brittany Trushel

By Jeff Milchen, with thanks to Stacy Mitchell.

Clearly communicating the importance of the local economic multiplier effect or “local premium” is a key part of effective “buy local” public education campaigns. The multiplier results from the fact that independent locally owned businesses recirculate a far greater percentage of revenue compared to absentee-owned businesses (or locally owned franchises). In other words, going local creates more local wealth and jobs.

The multiplier consists of three elements — the direct, indirect, and induced impacts.

Direct impact is spending done by a business in the local economy to operate the business, such as inventory, utilities, equipment, and employee pay.
Indirect impact happens as dollars the local business spent at other area businesses.
Induced impact refers to the additional consumer spending that happens as employees, business owners, and others spend their income in the local economy.

Private research firm Civic Economics has executed many studies quantifying the difference in local economic return between local independents and chain businesses. One such study in Austin, Texas showed an independent bookseller and music seller returned 3x as much money to the local economy as a proposed Borders Books and Music outlet would. The Austin Independent Business Alliance successfully used the study to rally opposition against a City-planned subsidy to attract a Borders Books and Music store.

Those results have been mirrored by subsequent studies (ten years of studies are summarized here), each showing a much greater local multiplier for spending at independent businesses than chains. These studies measured the direct and indirect impacts to determine the base level local economic activity of a purchase made at a chain and a local independent business.

On average, 48% of each purchase at local independent businesses was recirculated locally, compared to less than 14% of purchases at chain stores.

Civic Economics: Benefits of local business vs chains — Civic Economics: Benefits of local vs chains

The Institute for Local Self-Reliance conducted a study of the local multiplier effect in several small Maine communities in 2003. The study examined how much of a dollar spent at a local independent store is re-spent in the local area as payroll, goods/services purchased from area businesses, profits spent locally by owners, and donations to area charities. The study found that every $100 spent locally generated $45 of secondary local spending, compared to only $14 for a big-box chains — nearly identical to later results across the decade of Civic Economics studies.

Key Points

One study by Civic Economics has been the source of much confusion misrepresentation, to the detriment of many organizations. The study of Chicago’s Andersonville neighborhood found a total economic impact (i.e., direct, indirect, and induced) of $0.68 for each dollar spent at 10 local independents, compared to $0.43 for chain competitors. However, the projection of indirect and induced impacts does not mean $0.68 of each dollar spent at a local independent “stays” in the local economy, a widely spread inaccurate claim. It means $0.68 of additional local economic return is generated after additional spending cycles. Citing the higher numbers without including an explanation is wrong.

The Andersonville study examines just 10 businesses in one neighborhood of a large city, so we discourage extrapolating its findings too broadly. Businesses in smaller cities and towns typically have less ability to source many goods and services locally.

Be careful not to undermine the credibility of your group or campaign by presenting apples as oranges or statistically insignificant samples as a general truth! To gain respect as an authoritative voice within your community, we suggest you guard your credibility by checking your materials to ensure they convey verifiable, accurately worded information and only rely on primary sources.

Stickiness

In addition to being accurate, make sure your message is memorable. Saying, “Independent retailers return more than 3x as much money per dollar of sales than chain competitors,” is more memorable than talking in terms of percentages or comparing $0.48 to $0.15. For restaurants, consider messages such as, “Per dollar of revenue, locally owned independent restaurants return twice as much to our local economy than chain restaurants.”

Buying remotely on the web creates almost no local benefit, only minutes of work for a delivery person. Calculating the added local wealth that would be generated by a 10% shift to local independents is one tactic successfully employed by several communities.

How much of each $100 stays in your community? — The local benefit of an online, remote sale depends on local driver wage, the size of the area (number of stops per hour), and distance to processing centers.

Study Variants

The size of the local premium varies depending on the type of business. Restaurants and service providers generate a large multiplier because they are labor-intensive and more of each dollar of revenue goes to local payroll. Most retailers, unless they source an exceptionally high percentage of their goods locally, also create a more modest multiplier than restaurants.

This is not to say restaurants are better for economic development than retail. May retailers have sizable revenue and professional job opportunities, which are important to any local economy. It’s just helpful to be aware of these differences because the mix of businesses involved in a particular study will influence the results.

Land Use

In 2009, Stay Local! in New Orleans commissioned Civic Economics to evaluate economic return per square foot of retail space used by both local merchants and Target Corporation. The local merchants studied generated twice as much sales activity per square foot and nearly quadrupled the local economic return per square foot compared to projections for Target.

Quantifying Shifts in Spending

To gauge the overall impact on your local economy of shifting 10% of purchasing from absentee-owned to locally owned businesses, you would need to know the local multiplier for each category of spending and the percentage of peoples’ spending in each category. (e.g., 20% goes to groceries and the grocery multiplier is 0.15 or 5% goes to books and the local multiplier is 0.32).

Book Review: Owning Our Future

March 18, 2013 by staff

Marjorie Kelly, Being Amazing — Author Marjorie Kelly

Background — The Divine Right of Capital

The biggest problems often seem less like problems and more like unavoidable features of reality – their permanence and ubiquity make them sort of blend into the background. For example, Europeans once took for granted that Kings ruled by Divine Right. It was such a longstanding tradition, few people questioned it.

Marjorie Kelly, founder of Business Ethics magazine and a fellow at the Tellus Institute, has argued for more than a decade that we face another problem of this kind: ownership of corporations – specifically, the cultural norms and laws determining who owns what and what responsibilities and privileges come with that ownership.

In her 2003 book, The Divine Right of Capital, Kelly argued that modern ownership structures are expressions of old feudal ideas about the rights and privileges of ownership. She argues these old ideas are not only long-outmoded but also directly contradict some of our most central cultural values.

Consider the most basic calculation in corporate accounting: profit. Profit equals revenue minus costs. Thanks both to longstanding corporate cultural norms and court decisions like the Supreme Court’s Dodge v. Ford Motor Company, corporations feel obligated to maximize profit for their shareholders, which means maximizing revenue and minimizing costs. It sounds benign until we consider that costs include the salaries of every person doing the actual work of the company. Meanwhile, most shareholders are “absentee owners” who don’t interact with the company except to collect dividends (and raise hackles when they believe a company is too generous with workers).

The example above illustrates that “profit” isn’t just a value-neutral accounting tool. It expresses a judgement about who should receive the fruits of labor.

So companies generally shift as much of the reward of work from workers (top executives a notable exception) and shareholders as possible. What have shareholders done for this privilege? They’ve taken a risk, by handing over money without knowing if they’ll get it back.

The net effect is we’ve systemically promoted gambling at the expense of work.

I read The Divine Right of Capital months ago and had that rare and precious experience of having my brain spun around inside my skull. Despite initial skepticism, Kelly won me over.

Owning Our Future

If the Divine Right of Capital has a shortcoming, it’s that it provided diagnosis only; no cure was offered.

Nonetheless, a decade later, Kelly wrote Owning Our Future, and while it doesn’t provide anything like a comprehensive corrective (Kelly admits this in the book’s prologue) it’s an exploration of possible ways forward and a great conversation starter.

In recent years, an alternative ownership culture has blossomed around the edges of mainstream capitalism. We see it in the proliferation of coops, social businesses of various kinds, and employee-owned businesses.

The recent upward trend in job postings containing the phrase "social business" reflects the growing popularity of such enterprises. — The recent upward trend in job postings containing the phrase “social business” reflects the growing popularity of such enterprises.

Kelly argues these new models provide clues regarding how ownership structures might evolve for the healthier. Owning Our Future is a kind of survey of the different ownership structures emerging from this movement, including discussions of their strengths and weaknesses, and speculation about their potential impact on our world

To convey the fundamental difference between mainstream ownership models and the alternatives she discusses, Kelly draws a distinction between What she calls “Extractive” ownership models, and “Generative” models.

The goal of extractive models are to “maximize financial gain and minimize financial risks.” Kelly argues there are several problems with the extractive model. As just one example, if a company is obligated to maximize profit, it’s incentivized to leave some things off of balance sheets and contracts.

For example, let’s say a new coal plant raises the incidence of lung cancer in nearby residents. But the contracts to build the plant don’t acknowledge the existence of such costs, to say nothing of specifying who is to bear them, and the residents themselves aren’t acknowledged as stakeholders in the transaction.

As a result, residents and the local health system bear a brutal cost resulting from a transaction in which they had no say. Current corporate structures provide no adequate institutional mechanisms for sorting out the resulting messes, or better, preventing them in the first place. To the extent they get sorted out at all, they tend to involve dogfights in which burned citizens go to war with the companies involved. It’s antagonistic, trust-destroying, and often fails to solve anything.

This happens not because company managers are evil, but because our cultural and legal institutions tell those of us who work in corporations that our obligation is to the absentee owners (shareholders), even if it conflicts with our own interests or those of others.

Generative Models, on the other hand, take as their mission some notion of service to community. This is an old, time-honored idea, as Kelly acknowledges: “It’s what the butcher, the baker and the candlestick maker have always done – serve the community as a way to make a living.” In these models, profit is a part of the mission but only as a means to the more central end of community service. Interestingly, experts from various UK betting sites have noted that this approach can also be seen in businesses aiming to create a more sustainable and ethical betting environment, where user satisfaction and community well-being are prioritized alongside profit.

Although the idea is old, Kelly argues it can be and is being implemented not just by the one-employee shop down the street, but by big companies in complex, modern economies. She cites the John Lewis Partnership, owner of one of the largest retail chains in Great Britain. The company is profitable, owned entirely by employees, more democratic than any public U.S. corporation I know of, and its central mission is employee happiness, not profit. It has thrived through decades of disruptive economic change.

Kelly’s conception of generative design goes considerably beyond what I’ve mentioned here – she describes at length five core design principles behind the idea.

Although she argues forcefully for the virtues of generative models, she’s silent on the matter of how we might promote their proliferation. I wish she weren’t, because it’s not clear how her alternatives will displace the entrenched economic forces with sufficient speed and scale.

Another quibble is her discussion of stakeholders. One core principle of generative models is that companies must take account of stakeholder-interest. What she doesn’t much discuss is the exceptional difficulty in defining who is and isn’t a stakeholder. Certain global problems, like climate change, illustrate that, to some extent, every person on Earth is a stakeholder in every company on Earth. How do you take that into account in building a company?

Nonetheless, I loved Owning Our Future. Its umbrella message is that the concept of ownership is not, never has been, and should never be static. Ownership has conferred different rights and responsibilities in different times and places, and our notions of ownership can and will change in the future. Whether they will change for the better or worse depends on how attentive the American electorate is to the issue. Kelly’s book can go a long way toward focusing that attention.

For those interested, I recommend reading Kelly’s earlier book The Divine Right of Capital. It’s aged little and helps bring to light background assumptions most of us aren’t aware we hold. Recognizing those assumptions provides a sound foundation for fully appreciating Owning Our Future.

By Nick Bentley
Organizer, Reclaim Democracy

Amazon Plays Hardball on Tax Avoidance in Texas

November 30, 2012 by staff

The following is excerpted from “Lines Blur as Texas Gives Industries a Bonanza,” part of a series on corporate tax incentives in the New York Times. Published December 3, 2012

Tarik Carlton gathered with other workers in February 2011 to hear the bad news: Amazon was shutting its distribution center in Irving, where he loaded trucks for $12.75 an hour.

Business had been strong, but the online retailer did not want to pay a $269 million tax bill from the state comptroller. A standoff with the state ensued, and Amazon laid off the workers. “They didn’t have our interests in heart, truth be told,” Mr. Carlton said.

Amazon opened the distribution facility in 2005 in Irving, near Dallas-Fort Worth International Airport, and local officials awarded the company tax breaks on its inventory.

Positions at the warehouse included product pickers, dock crews and truck loaders. The employees were typically on the young side, and some had served in the military. The warehouse churned through workers because many could not meet the quota of products they were supposed to move each day, according to Frankie Lloyd, who helped Amazon find temporary workers to fill many of the jobs.

“It’s all about what you can do physically,” Ms. Lloyd said. “Like manufacturing, but without the great pay.”

The distribution business grew as manufacturing moved overseas and online shopping boomed. It is big in the Dallas area because two main train lines run here from Long Beach, Calif., where goods arrive from Asia.

The work is highly physical. One Amazon worker wore a step counter that logged five miles during one shift, according to Mr. Carlton, who only recently found a new job. He was among 12 former Amazon workers, including two warehouse managers, who agreed to be interviewed.

There was no air-conditioning in the warehouse, and Mr. Carlton and others said the temperature could reach 115 degrees. They said it was difficult to take breaks given the production quotas.

The pay was typically $11 to $15 an hour, Ms. Lloyd said. Amazon gave out small shares of stock and some bonuses, but the amounts were minimal, she said.

Amazon said it had been working to upgrade its warehouses, which it calls fulfillment centers. The company has installed air-conditioning in all its centers over the past year, said Dave Clark, the vice president for global customer fulfillment.

Mr. Clark said workers always received breaks, and sometimes free ice cream when the facilities did not have air-conditioning. He said the quotas were akin to “expectations that go along with every job, mine included.”

“I really do think these jobs get a bad rap,” Mr. Clark said. “They’re great jobs. They’re safe jobs.”

Mr. Carlton said he had no idea the company was being partly subsidized. “If you give them money, I think more should be expected,” he said, adding that Amazon should have been required to hire more people to handle the heavy workload.

John Bonnot, the director of business recruitment for the Irving Chamber of Commerce, said the city did not impose wage or benefit requirements on companies that received incentives. Irving had required that Amazon create only 10 jobs to receive the tax break.

Mr. Bonnot said Amazon “would have nothing but praise” for the original assistance from the state and the city, which outsources its economic development to the local chamber.

Things began to slide downhill in late 2010 when the state comptroller, Ms. Combs, demanded that Amazon pay the $269 million sales tax bill. The retailer had never charged its Texas customers the tax, giving it an advantage over on-the-ground competitors.

The company hired three powerful advocates with ties to the governor, according to state lobbyist disclosure records. One, Luis Saenz, had been the director of Mr. Perry’s political operation. Days after the warehouse closed, Mr. Perry said he disagreed with the comptroller’s decision to demand the taxes.

As it was battling with the comptroller, Amazon began negotiating with the Legislature, which was debating whether online businesses should be required to charge sales tax. The company told lawmakers that it would create up to 6,000 jobs in exchange for delaying sales tax collections, similar to a compromise it had struck in states like South Carolina and Tennessee.

The lawmaker with the most power in the decision was John Otto, a Republican member of the Texas House of Representatives. Like all Texas legislators, Mr. Otto’s government job is part time. He also works at Ryan LLC — a job that is not disclosed on his legislative Web site.

Mr. Otto drafted legislation that said online retailers like Amazon would not have to charge sales tax as long as it did not have distribution facilities in Texas. By then, the company had already shut the Irving warehouse.

Mr. Otto and Mr. Saenz declined to comment about the legislation. Amazon would not comment on its negotiations with Texas.

In July, Amazon began collecting sales tax from customers in Texas after the comptroller agreed to release the company from most of its $269 million bill. The company has also promised to open new distribution facilities and hire 2,500 workers. Amazon will owe the state a $1 million penalty if it fails to deliver.

[pullquote] For Texas to give up more than $250 million in tax revenues in exchange for 2,500 jobs amounts to about $100,000 per job.[/pullquote]

The math on the new deal angers former Amazon workers, especially those who are still unemployed. For Texas to give up more than $250 million in tax revenues in exchange for 2,500 jobs amounts to about $100,000 per job. Most distribution workers are paid $20,000 to $30,000 a year. The rest benefits the company’s bottom line, which generally increases executive bonuses and shareholder returns.

King White, a consultant who helps Amazon choose locations, would not comment on the online retailer but said that companies in general had come to view incentives as entitlements. “Everybody thinks they deserve something,” Mr. White said. “ ‘If I’m creating jobs, what’s in it for me?’ ”

The deal on the sales tax did not require Amazon to reopen the Irving facility. That touched off the latest state competition to win over Amazon.

Last month, the city of Schertz beat out neighboring San Antonio for one of Amazon’s warehouses. The company is currently in negotiations with Coppell, outside of Dallas, about an additional center. Like Schertz, Coppell has offered Amazon a deal to keep a part of the sales tax it collects there, among other incentives.

If Amazon accepts, it will be located near Irving and many of its former workers. Sharon Sylvas, 47, had moved from Kansas seven years ago to help Amazon set up the Irving facility. She lives nearby in a one-bedroom apartment with her partner, daughter and two grandchildren.

After Amazon closed, she was out of a job for over a year. With limited options, Ms. Sylvas took a temporary position in October at another company’s distribution center. It is a tougher job than the one at Amazon, and it pays less. For $11 an hour, Ms. Sylvas moves heavy inventory and other items.

She said that if Amazon returned to the area, she would work there again, despite the rigors of warehouse jobs. “It’s real miserable,” Ms. Sylvas said. “But you do it to make a living.”

Image courtesy of John Stich via Diesel.

See also
Amazon Bolts Texas (Columbia Journalism Review)
Amazon Picks U.S. State Sales-Tax Winners (Business Week)
Amazon’s Physical Presence in U.S. and the Sales Tax Battle (American Independent Business Alliance)

Campaigns

July 31, 2012 by staff

Revoking Corporate “Free Speech”

One of the core beliefs of Reclaim Democracy is that our Constitution’s Bill of Rights exists to protect the rights of living human beings and their voluntary associations exclusively. Yet since the late 1800s, federal judges have ignored the fact that corporations go unmentioned in our Constitution, and created a broad array of “corporate constitutional rights. Their arguments claim that corporations are legal “persons,” entitled to the protections of our Bill of Rights.

A decade before Citizens United v FEC launched the issue to the forefront, we established the web’s most comprehensive resource on corporate personhood to both explain, and lead to reversing, the process by which corporations seized the legal rights of human beings. This long-term struggle is a foundation of our work, and through Move To Amend, a national coalition of groups working toward this end.

In 2003, we used the Supreme Court case of Nike v. Kasky to challenge corporate “free speech” privileges and engage a national audience in rethinking such ill-gotten privileges. Now we’re building a campaign to erode and, ultimately, revoke the Supreme Court-created “right” of corporations to influence (and even run their own) ballot initiatives that dates to 1978’s First National Bank of Boston v. Bellotti ruling.

We are using high-profile battles to broaden awareness of this outrageous usurpation of citizens’ power and build toward the long term goal of reversing Bellotti. Our campaign plans and many background materials are posted here. Our proposed constitutional amendments address this and other long-term goals.

Establish a Citizens’ Debate Commission

The nationally televised presidential debates are the single most influential forum for most Americans to inform their views on presidential candidates, and offer a rare opportunity to hear candidates’ ideas unedited and in context. To our national disgrace, these debates have been controlled since 1988 by a front group of the Democratic and Republican parties that lacks any public accountability — the Commission on Presidential Debates (CPD).

During the 2000 election cycle, we had considerable success in raising public awareness of the illegitimacy of the CPD. That campaign led us to the necessary work of displacing the CPD with real debates that will serve democracy. In 2004, ReclaimDemocracy.org catalyzed and co-founded the Citizens’ Debate Commission (CDC), now supported by dozens of civic organizations from all over the political spectrum. Our ultimate goal of replacing the CPD with genuinely democratic debates will take some years to accomplish, but even in the first year the CDC helped force important changes that have moved the events from the sound-bite battles of recent years to more substantive debate.

See Presidential Debates Should Serve Citizens and Democracy, Not Political Parties for an overview and links to our research, writing and outside resources on the issue.

Critical Thinking Curriculum Project

ReclaimDemocracy.org has raised awareness of commercialism and corporate propaganda encroaching into every pocket of daily life. In addition to our articles, primers, and presentations, we seek to bring such awareness in classrooms — to tomorrow’s citizens. Our Critical Thinking Curriculum (no new materials currently being produced until we find a new volunteer or obtain funding for staff time) helps teachers nurture critical thinking skills in students of all ages, beginning with media literacy.

By helping our kids to learn how to determine the source of the messages they receive through a variety of media, they become savvy media users. They learn to challenge ideas presented to them through news stories, advertisements, textbooks and more.

See Branded: Corporations in Our Schools for one example of why this project is needed.

Breaking New Perspectives into the Mass Media

Our ongoing efforts to bring our message to the masses have resulted in op-eds by ReclaimDemocracy.org staff appearing in the nation’s most prominent newspapers — papers like the Washington Post, Newsday, The Chicago Tribune, La Opinion (the nation’s largest Spanish language paper) and dozens more. We continue our success in reaching our target audience through insightful writing that gets to the democratic root of the issues making headlines. Our outreach also consistently involves talk radio and occasionally televised talk shows.

Examples include: forewarning the public of the corporate agenda for commercializing public lands; re-framing the debate on campaign finance and other electoral reforms; and calling for true accountability for corporate crime and criminals.We invite you to contact us regarding adapting these articles and others for use in your local or regional media outlets

Volunteer opportunities: We always seek to work with skilled writers and researchers interested in reaching a broad audience.

Past/Ongoing Accomplishments

As Citizens United v FEC made its way to the Supreme Court, Reclaim Democracy principals teamed up with representatives of many other pro-democracy organizations to lay plans for exploiting the opportunity, win our lose, to launch corporate personhood into public awareness.

The result was Move To Amend, a nationwide coalition of grassroots organizations working toward the common goal of amending the Constitution to make clear the Constitutional rights are for living beings and that spending money to influence elections is subject to limitations needed to allow all citizens’ voices to be heard.

Before Reclaim Democracy.org was staffed, our director launched a first-of-kind model in Colorado, the Boulder Independent Business Alliance. BIBA helped locally owned, independently operated businesses to succeed, ensure continued opportunities for entrepreneurs, and strove to reverse the trend of losing such businesses to national chains.

We subsequently helped spread the successful model until, much like the Citizens’ Debate Commission, we teamed with others to help spawn the American Independent Business Alliance (AMIBA) to fill a role that merited a singularly-focused organization. AMIBA has since helped seed more than eighty more local alliances and maintains a vital communication network among these community-level efforts, while working to enhance national consciousness of the importance of community-based businesses.

Notably, AMIBA also is the leading grassroots business organization making clear that enshrining corporations with human rights is anti-business and anti-market. See AMIBA.net

Give a Gift to Your Local Economy

July 18, 2012 by staff

Holiday shopping choices make a big impact on your community

By Stacy Mitchell

Whether to patronize a chain or a locally owned business is not top of mind for many holiday shoppers, but it should be. It’s a choice that has profound implications for our economy.

If you shop at an independent toy store, such as Be Beep in Annapolis, Maryland, you will likely see products made by Beka, a small toy manufacturer in St. Paul, Minnesota.

A family-owned business, Beka has opted not to sell to chains like Target and Wal-Mart. Doing so, explains co-owner Jamie Kreisman, would require moving production to low-wage factories overseas, which would eliminate what he and his brothers most love about the business: their relationships with their employees and working hands-on with their products.

Beka is healthy, but its future depends entirely on the survival of independent toy stores. Over the last decade, Wal-Mart and Target have aggressively overtaken this sector and now capture 45 percent of U.S. toy sales.

If you buy groceries for your holiday meals at an independent grocer, like Catalano’s Market in Fresno, California, you will find lots of food produced by small-scale, local farmers, such as Paul Buxman.

A second-generation grower of peaches, Buxman nearly lost his farm selling to supermarket chains, which demand cutthroat prices and truckloads of perfect-looking, though often flavorless, fruit that only industrial farms can supply.

With bankruptcy looming, Buxman dropped the chains and forged relationships with independents like Catalano’s. He works hard to give them the best fruit and they honor this by paying a fair price and accepting the natural ebb and flow of supply.

Today, Buxman’s farm is back on track. Catalano’s is doing well too, but owner Michael Catalano worries about Fresno approving still more chain supermarkets and recently a Wal-Mart. Since 1998, the top five supermarket chains, led by Wal-Mart, have doubled their market share and now capture nearly half of all grocery spending.

Patronize an independent CD store, like Waterloo Records in Austin, and you not only support a business owned by a music aficionado, but help to ensure opportunities for new artists. Many beloved bands got their start when a few store owners fell in love with their first albums and began recommending them.

That does not happen at Wal-Mart, Best Buy, and other mass merchandisers, which now account for more than half of all album sales, but stock only chart-toppers and have no room for unknowns.

Chain retailers have expanded dramatically over the last two decades. Home Depot and Lowe’s, barely a blip on the radar screen in 1986, control half of the hardware and building supply market. Barnes & Noble and Borders account for half of bookstore sales. Every sector is now dominated by a couple of chains, and Wal-Mart dominates them all, capturing one of every ten retail dollars we spend.

We assume that the chains represent economic progress, but in fact they take far more out of our economy than they contribute.

As the chains have expanded, tens of thousands of independent retailers have lost their livelihoods and laid off hundreds of thousands of employees. A study by David Neumark at UC-Irvine found that every new Wal-Mart store actually eliminates many more retail jobs than it creates.

The expansion of the chains has triggered a cascade of losses in other economic sectors. Some three million U.S. manufacturing jobs have been eliminated since 1990, in part because the chains have pressured companies, including Black & Decker and Levi’s, to slash costs by moving overseas.

The chains also return very little of what their stores take in back to the communities where they operate. A study in Maine by the Institute for Local Self-Reliance found that only 14 cents of a dollar spent at big-box store remains in the state’s economy.

In contrast, the study found that independent retailers spend more than half their revenue locally. They bank at local banks, hire local accountants, advertise in local media, and require many other local services that chains do not. For mid-sized and smaller cities especially, this is a vital source of economic activity and jobs that pay a middle-class income.

In exchange for all the businesses and jobs they destroy, the chains offer us employment in their stores. Wages for most of these jobs are so low that many big-box employees rely on Medicaid, food stamps, and other taxpayer-funded programs to get by.

None of this looks much like progress. In fact, what the big-box model most closely resembles are the old colonial economies of the European superpowers, which were organized, not to improve the lives of the local inhabitants, but to extract their wealth.

This holiday season, we can declare our independence and begin building a more prosperous economy by forgoing the chains and seeking out locally owned businesses.

Stacy Mitchell is a senior researcher with the Institute for Local Self-Reliance and author of Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses (reviewed here ).

This article was first written for the Beacon Broadside.

Homegrown Businesses, Not Global Chains, Build Community Prosperity

July 18, 2012 by staff

I’ll say this for the featured speakers on the opening day of the recent Montana Economic Development Summit: they were consistent. Speaker after speaker noted Montana must “compete in the global economy” to thrive and how the internet was key to doing so. The clichés quickly grew old, but ideas only become clichés if they present some truth.

Technology and international trade undoubtedly serve an important role in Montana’s economy. Yet the cheerleading for corporate globalization only elevated my skepticism of the keynote speakers’ motives (all out-of-state, white, male millionaires or billionaires). After all, if something really improves people’s lives, you don’t need to tell them repeatedly how great it is.

More concerning was the invisibility of community-serving businesses—hardware stores, grocers, farmers and countless other businesses that serve the everyday needs of Montanans. These businesses may lack the sex-appeal of global exporters, but they are the bedrock of local economic vitality. Moreover, their importance only will grow as transportation costs rise and diminish the advantage wielded by global corporations dependent on cheap fuel and weak regulations abroad.

Unfortunately, Target and Wal-Mart—the only two retailers with tables in the Summit’s exhibition hall—represent the opposite of sustainable economic development. Global chains’ displacement of local businesses ensures more dollars will leave the local economy and fosters dependence on corporations with no real commitment to our communities. The history of Butte, MT, where the summit was held, provides a prime example of how such dependence ultimately can ravage a local economy and environment.

But while these mega-corporations and their entourage of think tanks and public relations firms persuade us of their benefits, the benefits of doing business locally often go unappreciated or ignored.

We have much to gain personally from the knowledge, personal service, and quality offered by independent businesses, but the economic benefits are less obvious. Independent local businesses typically hire local designers, sign makers and attorneys to get started. Whether employing people in-house or hiring other local firms, they create opportunities for insurance brokers, computer consultants, advertising agencies and others.

In contrast, global chains typically open a clone of their other units. Locally, they employ many clerks and cashiers, but provide few higher paid jobs and use minimal local goods and services. Meanwhile, profits exit town to corporate headquarters. Thus, local independent merchants recirculate three or more times as much of each dollar in the local economy as chain stores—a multiplier effect that drives economic growth far more than attracting outside entities.

Independent businesses often look for ways to stand out in their communities, embracing unique and memorable tools that reflect their commitment to quality and personal service. One such tool is the use of metal business cards, which offer a level of sophistication and durability that traditional paper cards lack.

Unlike generic cards, Metal Kards add a distinctive touch that resonates with clients and colleagues alike, symbolizing the business’s dedication to excellence and individuality. These cards often become conversation pieces, helping local businesses establish a lasting presence in the minds of potential customers while enhancing their brand’s image.

In today’s digital age, standing out in a crowded market isn’t just about physical presence—online visibility is just as crucial. SEO (Search Engine Optimization) is essential for independent businesses aiming to increase visibility and reach a broader audience. Effective SEO strategies not only help improve a website’s ranking on search engines but also ensure that a business’s online presence reflects its unique qualities and values.

Just like a well-crafted metal card, a strong SEO strategy leaves a lasting impression, helping local businesses build credibility and trust with potential customers who are actively searching for services. One powerful aspect of SEO that can significantly enhance a business’s online presence is link building.

By obtaining quality backlinks from reputable sources, businesses can improve their domain authority and overall search engine ranking. SERPninja is an excellent resource for businesses looking to grow their backlink profile. With its proven strategies for acquiring high-quality, relevant links, this company helps businesses build a strong online foundation.

By focusing on these organic methods of growth, local businesses can create a digital presence that mirrors the trust and connection they foster with their community, establishing themselves as a prominent force in both the local and online markets.

Small manufacturers and service industries also have a stake in the health of these entrepreneurs, who are more willing give their new products and services a chance. Independent businesses, in many realms, are interdependent; their fortunes rise and fall together.

Further, local businesses also return a greater percentage of sales to civic events and community causes, though you don’t often see them photographed with table-sized checks to call attention themselves.

Despite “globalization” hype, understanding the multiplier effect and the benefits of a local ownership is crucial to intelligent, sustainable development in our communities.

Retail chains boast how their stores create hundreds of jobs, but “create” is simply a euphemism for “relocate.” We don’t suddenly need more toasters or toilet paper when a big box store opens. As a result, nearly 85% of sales at new big box discount stores come directly from existing local businesses. Combine this impact with the efficiency of consolidating most well-paying jobs at headquarters, and most chains become net disemployers.

Chain proliferation hasn’t just resulted from market competition; it’s had plenty of help from what Stacy Mitchell, author of the outstanding book Big Box Swindle , calls “the invisible hand of Uncle Sam.” For local officials luring a new national chain is politically seductive and much easier than actual job creation. As a result many chains receive millions of dollars in local and state subsidies—creating a decidedly uneven playing field for independent competitors (whether or not such subsidies are offered locally).

The real giants like Wal-Mart are masters of extracting public subsidies, but they’re not alone. For example, Cabela’s is seeking to move into Montana, starting with Billings, but prefers not to compete in a “free market.” The corporation is seeking municipal subsidies that few (if any) Montana outfitters enjoy.

Tax evasion schemes also unfairly handicap entrepreneurs who pay their fair share of taxes—and raise them for the rest of us. Incredibly, when State Senator Jim Elliot investigated corporate income taxes in Montana, he discovered 40 percent of the largest 500 corporations doing businesses in Montana paid less than $500 in state income taxes in 2002. Such perverse practices must change to create a level (or better) playing field for homegrown businesses; chains already have enough laws rigged in their favor nationally.

For long-term progress, a conceptual change also is necessary. As citizens, we should consciously plan our future with rules that will encourage the values we want reflected in our communities. And as consumers, each time we spend money, we should weigh the full value of our choices, not just for ourselves short-term, but for the future we want in our own hometowns.

By Jeff Milchen, co-founder of the American Independent Business Alliance, which helps communities around the country form coalitions that help independent business compete effectively and prevent chains from displacing local entrepreneurs.