Rise Up: Michael Shuman on Launching a Small-Mart Revolution

October 12, 2006

Michael H. Shuman

Michael Shuman, vice president of enterprise development for the Training & Development Corporation and co-founder of the Business Alliance for Local Living Economies (BALLE), has long been an advocate of buying local: A periodic commentator for National Public Radio, Shuman has written articles for The Nation, Weekly Standard, Washington Post, and New York Times. He is also the author of seven books, including Going Local: Creating Self-Reliant Communities in a Global Age.

In his latest book, The Small-Mart Revolution: How Local Businesses Are Beating the Global Competition (Berrett-Koehler), Shuman further explores how buying, planning, and thinking local is not just a marketing strategy, but a movement, or small-business revolution, with the capacity to revitalize and improve various aspects of community -- economy, environment, security, and overall quality of life. The exploration includes eight practicable trends that dispute the argument that "bigger is better" when it comes to business.

Shuman recently spoke to BTW via e-mail about ways that independent retailers can effect a Small-Mart Revolution.

BTW: According to a report issued recently by the Office of Advocacy of the U.S. Small Business Administration, small business continues to drive our economy. The report noted that in 2005 small businesses represented 99.7 percent of all the nation's employer businesses, yet, as you note in The Small-Mart Revolution, big businesses get nearly all of the $50 billion taxpayers spend each year to attract or keep these companies in their community. Is there anything local businesses can do to counter this?

Michael Shuman: Actually, the $50 billion figure represents just pork from state and local authorities; the feds give non-locals another $63 billion. Consider some of the other market "imperfections" facing small businesses. Locals must pay the price of unenforced antitrust laws (Wal-Mart could never have carried out many of its predatory practices a generation ago). Sales tax laws disadvantage local businesses by exempting big mail-order and Internet retailers. Income tax laws give breaks to non-local companies that move overseas. Trade laws outlaw local purchasing by state and local governments. Securities laws make pension and mutual fund investment in local business impossibly expensive.

The good news is that the vast majority of the Americans, including principled conservatives and good-government moderates, detest these inequities. The best counter is for emerging business alliances across the country, like those affiliated with the Business Alliance for Local Living Economies (BALLE) and the American Independent Business Alliance (AMIBA), to begin organizing cities, counties, and states to overhaul these laws. Just axing the $50 billion states and localities give away in the name of attraction each year would, in my view, greatly expand the competitive strength of small businesses.

BTW: In Small-Mart, you note that "the most important trends in the local economy actually favor the expansion of Small-Marts." What are some of these trends and how do they favor small business?

MS: In my book, I describe eight global trends that are favoring local business. The most obvious is the rising price of oil. Higher energy costs represent bad news for some Americans, but great news for local economies. We'll use non-local cars less, embrace more smart growth, conserve more energy and keep more electricity and oil dollars home, and manufacture more local goods for local distribution (because Wal-Mart production in China, coupled with 10,000 to 15,000 miles of shipping, will be less competitive).

Here are some other trends: In many product categories, like food and energy, distribution costs are far greater than production costs, which opens new opportunities for cost savings through localization. Americans also are consuming more and more services instead of goods -- a trend that has been running for several decades -- and services are inherently local. (How many people get massages over the Internet?) And the accelerating decline of the dollar, guaranteed because of our growing trade deficit, will increase the cost of imports and make domestic production more competitive.

BTW: The Andersonville Study of Retail Economics reveals that 68 percent of money spent at local businesses is reinvested in the community. You describe a "multiplier effect" that takes this several steps further. How does this work?

MS: The "multiplier effect" is one of a dozen reasons why, when price and convenience are roughly equal, conscientious consumers should always favor local goods and services. Every local purchase you make triggers purchases by others. For instance, a dollar spent on rent might be spent again by your property owner at your local grocer, who in turn pays an employee, who then buys a movie ticket. The more times a dollar circulates within a defined geographic area and the faster it circulates without leaving that area, the more income, wealth, and jobs it generates.

A dozen studies around the world, including the Andersonville study you cite, point out that local businesses typically have higher multipliers than similar non-local firms. The reason is obvious: Local businesses spend more money locally. Unlike a chain book store, for example, a local book store has local management, uses local business services, advertises locally, and enjoys a local stream of profits. Just these four items can easily add up to a quarter or more of a given business' expenditures.

BTW: You credit the Small-Mart movement with the ability to improve everything from the individual and collective quality of life, the environment, health care, and even improved security from natural disaster and terrorist attacks. Is this an overstatement?

MS: What I argue is that rebuilding our local economy is a necessary condition for achieving all these ends -- though admittedly an insufficient one. We still need to improve all kinds of public policies, domestic and foreign, and we need to exercise more responsible individual behavior as consumers, shareholders, and citizens.

That said, it's hard to overstate the impact of just localizing energy systems. Amory Lovins of the Rocky Mountain Institute says that every household could save about $3,000 per year if it undertook cost-effective energy conservation. That would put more money in breadwinners' pockets than several years of likely raises, reduce their families' exposure to the pollutants from coal and nuclear plants, provide fewer targets for domestic terrorism, and begin to unplug our dangerous dependence on Mideast oil, which ultimately underlies our vulnerability to Al Qaeda.

Similar benefits will result as we localize food, water, and other essentials.

BTW: To many consumers, the concept of buying local means occasional visits to their local bookstore, restaurant, or coffee house rather than a way of life that can sustain or even dramatically improve their community. What can business owners do to convey the importance of the Small-Mart Revolution?

MS: Many consumers already understand the importance of buying local. Everywhere you go these days, you find signs saying "locally owned bank," "we sell local produce," and so forth. It's almost impossible to find an advertisement that says, "Not local -- buy from us!" Even obviously non-local businesses are trying to claim the mantle of local. HSBC calls itself "The World's Local Bank."

One strategy for small businesses, then, is to raise consumer awareness about which businesses are local and which products are local -- and which companies, like HSBC and even Wal-Mart, are engaging in deceptive local-wash. BALLE and AMIBA chapters are doing a great job of this through their Local First Campaigns, Buy-Local Weeks, directories of local businesses, colorful labels on local goods, and local debit, credit, gift, and loyalty cards. As Betsy Burton, proprietor the of the Kings' English bookstore, reports, Local First efforts in Salt Lake City have given her store literally hundreds of thousands of dollars of free publicity.

BTW: You've described the Small-Mart revolution in terms of promoting community rather than being anti-big business, or anti-Wal-Mart. Can you talk more about this?

MS: I understand the impulse to fight chain stores, and sometimes ordinances preventing or limiting large chains or formula retailers can rally public opinion around local businesses and save a downtown. But sooner or later, local businesses will have to compete more effectively against the chains. Many are already, and many more can do so through business alliances and by deploying other strategies I outline in The Small-Mart Revolution.

I worry that every bit of energy, time, and money spent fighting chains ultimately will be unavailable to increase the competitiveness of small business. In many communities, fighting chains means splitting business owners from consumers who otherwise could be collaborating on Local First efforts. In Chicago, the recent anti-Wal-Mart ordinance wound up pitting poor African-American neighborhoods (who wanted access to Wal-Mart) against white, middle-class small-business owners.

It's better, I believe, to build broad consensus around supporting local businesses, mobilize consumers to Think Local First, create new opportunities for investors to support local businesses, and remove all the parts of public policy that tilt in favor of chains (rather than to create new, special protections for local business). Simply denying chains subsidies and capital improvements, which almost everyone can agree on, is often enough to scare the behemoths away.

We need to take a longer-term perspective. If we can steadily improve the competitiveness of local business and stop trying to prop up inefficient global enterprises, the Small-Mart Revolution will happen. --Interviewed by Karen Schechner

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