Stronger Economies Together: Crossing Boundaries Successes

Regional economic development plan

Economic / January 12, 2018

Throughout the world today, local communities are struggling to main­tain their economic vitality and quality of life. The reasons for this are both economic and political, and are largely the result of external forces that are driven by outside agencies like central governments, central banks, and large transnational corporations. In brief, decisions made by others outside of the community are having enormous impacts on life within the community. Be that as it may, it is possible for communities to regain a large measure of control over their own welfare and to ameliorate the effects of those exter­nal forces by employing peaceful approaches that encourage human solidarity and are based on private, voluntary initiative and creativity.

I often use the analogy of the small boat harbor to convey the general idea of how local communities can protect their small enterprises while remaining open to the global economy. The process of globalization, while having many positive aspects, has thus far been carried out in such a way as to be destruc­tive to small businesses, local economies, and democratic governance. It is as if there were a policy to remove the breakwaters from every small boat harbor in the world, the effect of which is to expose small boats to the turbulence of the open sea. As I put it in one of my lecture presentations — a rising tide may lift all boats, but the tidal wave of globalization smashes all but the biggest.

But a healthy global economy and a peaceful world require healthy commu­nities. Is there still a place for small businesses? Must every advantage be given to the corporate megaliths at the expense of small enterprises? The ancient economic debate that poses “free trade” against “protection” is too limiting and outmoded. Healthy economies require both free trade and protection, each confined within its appropriate bounds. Communities must create the equivalent of breakwaters to protect their small enterprises and workers, while at the same time remaining open to the national and world economies.

It is encouraging to note that there has been a recent major awakening about the mega-crisis that is developing worldwide, and a plethora of creative responses to it. Sustainability, relocalization, human scale, and the devolution of power are the current buzz. The big question, of course, is how are they to be achieved in the face of the tremendous forces that are driving us toward the precipice?

Approaches to Community Economic Development

Sadly, the orthodox approach to community economic development over the past several decades has centered upon efforts to recruit some large corpora­tion to come and set up operations in the local region — with the expecta­tion that they will provide additional jobs for local people, stimulate business for peripheral industries and the service sector, and ultimately add to local tax revenues. The consequent competition among cities and states in pursu­ing that strategy has resulted in corporations wresting enormous concessions from host communities in such forms as tax abatements and infrastructure provided at taxpayer expense. But capital is notoriously fickle and recent devel­opments have given it unprecedented mobility. Quite often the experience has been for companies to leave town as soon as the “free lunch” has expired, only to play the same game again somewhere else.

It is widely acknowledged that, in comparison to large corporations, small and medium enterprises (SMEs) contribute proportionately more to the economy in jobs, productivity, and innovation. According to the Organization for Economic Cooperation and Development (OECD), “SMEs play a major role in economic growth in the OECD area, providing the source for most new jobs. Over 95% of OECD enterprises are SMEs, which account for 60%-70% of employment in most countries. As larger firms downsize and outsource more functions, the weight of SMEs in the economy is increasing. In addi­tion, productivity growth — and consequently economic growth — is strongly influenced by the competition inherent in the birth and death, entry and exit of smaller firms.” The same pattern would seem to hold in other parts of the world, including America.