Author: Incentives wasted

Government incentives for jobs and economic development -- from payouts to tax breaks and other public giveways -- are wasted on luring major corporations, instead of on investing in locally owned business, according to a prominent national researcher and author Michael Shuman.

Shuman, author of "The Small-Mart Revolution: How Local Businesses Are Beating Global Competition," spoke with members of Lowcountry Local First on Wednesday in advance of this weekend's eighth annual Business Alliance for Local Living Economies Conference at the College of Charleston.

Shuman criticized efforts by federal, state and local governments -- including the "incentive-addicted state of South Carolina" -- which use tax money to lure Toyota or BMW with the goal of exporting goods "as far and wide as possible" as the ultimate source of generating wealth.

Yet he said studies, including some of which he has been involved in, have proved consistently that locally owned, small business always create more jobs and wealth than big, non-locally based businesses.

Furthermore, small, local businesses typically have social and environmental benefits as well.

"We can't be neutral about economic development anymore," Shuman said. "Our public dollars are shrinking. We have to be absolutely laser-like in our intentions on how we spend public money. If you are going to spend money on economic development, you better focus that on the things we know succeed and that's local business."

Shuman recently collaborated in a study for the Kellogg Foundation that looked at the three major economic development programs in 15 states in the United States. Basically, 90 percent of the programs spent 90 percent of their funding on non-local businesses yet didn't yield a similar percentage outcome for jobs and economic growth.

And despite incentive packages for big, more globally oriented businesses over the past 20 years, Shuman said locally owned, small businesses remain the source of about half of the jobs in the United States. The only sector that betrays that fact is the highly visible retail sector, which accounts for only 7 percent of the economy.

"Today, we're in a huge wrestling bout between two archetypes of capitalism that I give women's names to: Tina and Lois," said Shuman, noting that "TINA" is derived from Margaret Thatcher's assessment that "There Is No Alterative" to the global economy and that "LOIS" stands for "Locally Owned and Import Substituting."

"The mantra of Tina is to 'attract and retain' business," Shuman said. "Here's the weird thing about that. You can't attract a local business. It's an oxymoron. And if the only way we can retain you is by paying you a bribe, how connected are you? So the essence of economic development has nothing to do with local business."

He gave several examples of Lois, including Ann Arbor's Zingerman's Deli that branched into nine different, locally based businesses that employ 530 people and have annual revenues totally $30 million.

Shuman said a misconception exists among critics of the localization.

"People who make fun of localization think we are trying to avoid the rest of the world," Shuman said. "In point of fact, we become wealthy by working with each other and then we have a stronger ability to engage in the global economy."