Ingrid Ault is local to the core. She was born and raised in Ann Arbor, Michigan and attended public schools including Eastern Michigan University in Ypsilanti, Michigan where she received a B.S. in geography and an M.S. in urban planning. It has been reported the average person has three careers. Ingrid surpassed that long ago. Her background includes positions in hospitality, advertising, new home construction, event planning, retail, accounting, non-profits, and government, that have prepared her for her current position as executive director of Think Local First of Washtenaw County.
Think Local First provides resource sharing and community building opportunities for locally-owned independent businesses as well as raising community awareness and developing strategies for supporting these businesses. They are a non-profit that has one part time employee, Ingrid Ault. However, she jokes that she has ten bosses: the board of directors. Currently they have 261 business members and a handful of individual supporters.
Why We Can't Shop Our Way to a Better Economy
In 1773 citizens engaged in an act of corporate sabotage during the Boston Tea Party. Parliament passed the Tea Act giving the British East India company an exemption to sell tea without paying tax. The purpose was to undercut local tea merchants and take their business, so the community revolted. What ignited the Boston Tea Party was not so much a tax, but a corporate tax loophole.
Over the last 20 years, a handful of businesses have taken control of large swaths of the economy in much the same way. Wal-Mart was a small player just 15 years ago – now it takes one of every four dollars spent on food. And in dozens of cities it already has half the market. Plus, many small food based businesses have been absorbed by these behemoths marketing under different names to give the allure of choice.
And the future of retail looks even more concentrated. One-third of everything we buy on line is purchased from a single company, Amazon.com. Many people are beginning to question the wisdom of this and are changing the way they shop. But a purely consumer based response is not likely to get us where we need to go because it doesn't fully recognize how it got us where we are today.
For a long time the story that drove big business is "Bigger is Better". It's more efficient, more productive, and it outperforms. But this idea suffered a serious blow four years ago when the wizards of finance went to Congress panic stricken, insolvent, with their hands out. It turns out big banks are not safer and they are not even more efficient. According to economists, banks reach their peak of efficiency when they reach the size of a small institution. Beyond that they become top heavy with bureaucracy explaining why you pay more fees than when you bank at a small bank or credit union.
But the more important aspect of big banks is the larger they grow, the more disconnected they become from the community. This prevents banks from doing the most important work: that is to make nuanced judgments about risk. And in particular, assessing the risk that new businesses will succeed or fail. Local banks are particularly good at this as they have soft information to accompany the hard data all banks request. They get to know the borrower and intimately know the local market, while big banks are making decisions in large regional offices and are largely flying blind. So, rather than acquire lots of possible bad small business loans, they have opted to sharply curtail lending to small businesses. Studies show that in regions where big banks are prevalent, the economy has a smaller percentage of small businesses and slower job growth.
And it is not just banking. In sector after sector you begin to see that consolidation is not serving our interests very well. Small farms produce nearly twice as much food per acre than big farms with far less environmental impact. And the bargain that big-box retail once seemed turns out to cost us far more than just lost income. This model has almost single handedly diminished the middle class. Manufacturing and small businesses have shrunk. In exchange, the jobs supplied are so low wage that many employees rely on food stamps.
Or consider the case of pharmacies. It has become more and more difficult to find a locally owned pharmacy in the U.S., unless you live in North Dakota. Under a unique state law, virtually every pharmacy is locally owned. What has this meant to their economy? There are far more pharmacies per capital than other states (which is critical for its rural population), and prescription drug prices are among the lowest in the county.
So, if they aren't outperforming, how is it these giant companies have become so dominant? The answer is much like the British East India Company – they have used their market power and policies to influence and rig the game.
Since 1995 we have given over $275 billion to farms through the
Farm Bill. Almost 80% of these dollars are given to the top 10% of big farms to subsidize the building blocks of processed foods (corn and soy). This explains why a fast-food hamburger costs less than a head of lettuce. And our tax codes are littered with loopholes that allow big businesses to escape paying their fair share of taxes. There is a lone small building in Delaware that is home to hundreds of big boxes because the address allows them to avoid paying state income taxes.
There is nothing inevitable about the current structure of our economy, as it is not the product of natural evolution. It's the logical outcome of a set of policies. Many people are beginning to question the wisdom of this and in just the last few years we have seen a power shift. The number of farmers markets has doubled, we have added 500 independent book sellers, 1,400 neighborhood grocery stores, factories are beginning to produce goods again, and more than 600,000 people have moved their accounts from big banks to local banks and credit unions. Along the way we have learned there is a lot to recommend this change and that our economy is rooted in community. We are seven times more likely to have a conversation at a farmers market than a big box.
Economies with dense local businesses have strong social networks that in turn give them an edge when it comes to solving problems and innovating. As remarkable as these developments are, they are unlikely to have any marked long term change if the only way we are approaching this is through our purchasing power. Consumers are limited since they operate as lone individuals, making decisions based on the options that are presented to them. It is a seductive message, but it is just part of the solution.
These small decisions made by consumers are like swimming upstream against a powerful current of policies that are taking our economy in exactly the opposite direction. What we really need to do is change the underlying structures that create these policies. We can only do that by acting collectively as citizens.
This is one of those moments where you can effect change. We could begin by campaigning for turning the farm bill on its head and instead of giving the most money to big farmers, divert it to local farmers feeding their neighbors. Or we could close all of those loopholes that give big businesses an advantage when paying their taxes. Or maybe we reexamine anti-trust laws that have been on hiatus for 30 years and ask: Is it in our best interest to have one company control one-third of e-commerce?
Some of the answers are right here and largely there is citizen support for them. The question that we have to grapple with is seeing our trips to the farmers market and the local bookstore not as the answer, but as a first step. Now is the time to turn this into a political movement.
This article is a summary of a TEDx talk given by Stacy Mitchell of the Local Institute for Self Reliance on October 20, 2012. To view it in its entirety click on this link.