Erik Hoffner is a freelance photojournalist and Outreach Coordinator for Orion magazine
Wall Street cheerleaders hail the current Dow Jones level above 13,000 (and other such economic indicators) as evidence of a recovery. But as the mainstream media happily reports that we’re on our way out of recession (does NPR really need to include those Dow numbers as part of every single newscast?), others like Mike Konczal at Truthout have taken to calling it the '1% recovery,’ since the latter have reaped 93% of the income gains while average Americans have seen no such improvement.
What news reports generally gloss over is that local businesses comprise more than half the economy by output and jobs, and virtually none of them are hitched to Wall Street. Meanwhile, the 99% are forced to invest their long-term savings ($30 trillion!) in Wall Street, rather than on Main Street where Americans could actually see the benefit, thanks largely to prohibitive SEC rules.
A new book by Michael Shuman, Local Dollars, Local Sense, questions why it is that only one percenters are able to invest locally, where such funding does the most good, and it illustrates clever workarounds pioneered by entrepreneurs, individuals, and communities. He took a few minutes away from his book tour to answer my questions:
Should we seek a bailout for Main Street, Michael? Would that look like Obama’s stimulus package?
Michael Shuman: My criticism of Obama’s stimulus package is that it focused on traditional economic development strategies, which favor big global businesses, rather than on local economic development, which favors small business. Many entrepreneurship programs, for example, can create a job for $1-2,000. If you believe the Obama administration’s numbers, which I don’t, its early stimulus measures had a per job cost of $250-350,000. No wonder the Tea Party is so furious and progressives are so disappointed! We know that local businesses are the best job creators, and benefit community well-being in myriad other ways – lower carbon footprints, more entrepreneurship, more social equality, more smart growth. Yet the administration failed to seize the moment.
Politicians like to say 'growth is good' and hitch that to inscrutable GDP goals. But when it comes to local economies, are you seeing growth there, and with what practical result?
Despite poor national policies, many local economies are flourishing as a result of initiatives like local purchasing, local investing, and local business collaboration. For example, in my book I give the example of Hardwick, VT, a 3,000-person community that decided to become one of the best local food centers in New England. Its efforts to nurture new local food businesses resulted in the town creating 100 new jobs during the early stages of the financial crisis, at a time when most rural communities were losing jobs.
Your book notes that Americans have $30 trillion in long term savings (mutual funds, bonds, stocks, and pensions) tied up on Wall Street. Why don’t we keep that local? Is Joe Public prohibited from investing in his community?
It’s not that the 99% are prohibited from investing in firms that are small—it’s just that the legal costs of complying with the SEC rules are so high that almost no small business bothers. The historical reason for these “disclosure” requirements was to prevent Bernie Madoffs from selling Florida swampland to Grandma. But the fact is that these thick books of turgid legal prose that lawyers prepared are never read by the people they were intended to protect. And as we’ve learned with eBay, you don’t need to keep the masses out of the marketplace to prevent fraud – all you need to do is provide peer feedback on buyers and sellers, and the marketplace polices itself. If the SEC’s rules existed for consumer goods, then commerce as we know it, whether on eBay or in farmers markets, would come to a halt. Everyone knows it’s time to overhaul these obsolete rules.
On that topic, you were very supportive of The Entrepreneur Access to Capital Act, HR 2930. What came of that bill?
This week is a watershed moment to end what I sometimes call “investment apartheid,” because the Senate finally came up with a compromise bill, cosponsored by Republicans and Democrats, that will enact it. The House overwhelmingly supported reform already, and President Obama says he’s prepared to sign. The Act basically eliminates the legal hassle, red tape, and expense for small businesses (which seek) small investments from the 99%. Under the Senate bill, every American will now be able to invest $2,000 per company per year, or 5% of their annual income, whichever is greater. I believe that, in time, this will result in a massive transfer of capital, $15 trillion, from Wall Street to Main Street.
Can you share a favorite local economy hero, organization, or initiative outlined in Local Dollars, Local Sense?
My book is based on more than three dozen interviews with great local-investment pioneers all across the country—it’s hard to pick just one! But in terms of initiatives, the single one I would put in bright lights is the Self-Directed IRA. By hiring one of many companies that can help you do this (none of the 7,500 mutual funds in this country invests in local business), often for $100-200 per year, you can start moving your retirement money out of Wall Street and into local banks, cooperatives, and local stock issues. If even just 10% Americans did this, it would be the beginning of the end of Wall Street as we know it.
Michael Shuman will continue this discussion live and answer questions during a free phone-in event and webinar on Thursday, March 22nd at 7 PM EST. More information and registration here.
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