Rachel's Democracy & Health News #830
November 10, 2005
THE SMAL-MART REVOLUTION IN LOCAL ECONOMIC DEVELOPMENT
[Rachel's introduction: A grass-roots movement for locally owned,
socially responsible business is flourishing in the U.S. and Canada.
The Business Alliance for Local Living Economies (BALLE) is fostering
business practices that are good for people, good for communities, and
good for the planet.]
By Tim Montague
[This document is online with live links at http://tinyurl.com/qafad]
Today only 30% of Americans say they support the goals of
environmentalists. Most people rate jobs and the economy as far more
important than protecting nature. Is there a way to bridge the gap, to
protect nature, protect communities, and create jobs? There is.
We surely need good-paying jobs. They say we're in an economic recovery
-- corporate profits are up and GDP (Gross Domestic Product) continues
to climb at about 3.5% per year -- but ask the average American worker
how they see it and you'll get a different picture. For 30 years, real
wages have stagnated for middle-income workers and have actually
declined for low-wage workers. In 1979 the average American earned
$15.91/hr (in 2001 dollars). Twenty years later, in 1999, average
worker productivity had grown 42% but take-home pay had risen only 15%.
For the 100 million American workers with no college education, the
picture is worse -- their average wage dropped from $6.55/hr in 1979 to
less than $5.00/hr in 2003. In the same period, CEO pay of the ten
largest corporations increased 4,300% (from $3.5 million per year to
$154 million).[2, p.10]
High-wage union jobs -- in which the union worker makes 21% more than
their non-union counterpart, and where a person can expect healthcare,
a two-week vacation, and maybe even retirement benefits -- have been
declining for fifty years. U.S. union membership peaked at 35 percent
of the labor force in the mid-1950's and is now down around 13 percent
(in the private sector, it's 8%).[2 p. 14] Big companies are whittling
away at medical, overtime pay, and retirement benefits. United Airlines
recently wiped out the pensions of 120,000 retirees with the help of a
federal bankruptcy judge. The pattern is clear: corporations are
shedding their responsibilities for retired workers. Who's going to pay
the rent, groceries, and medical bills of all those retirees? In 2003,
45 million Americans had no health insurance, up 1.4 million from the
year before and up 5.1 million from the year 2000. It's not a pretty
Increasingly, the U.S. workforce competes directly with low-wage
workers in developing countries. This creates a "race to the bottom"
for wages, working conditions, and environmental standards
simultaneously -- all of which are ways to "externalize" costs of
production and thus to move a larger portion of the pie into the domain
of the owners. Nine out of ten workers is now an employee -- as opposed
to a business owner -- yet Americans overwhelmingly cling to the values
of freedom, independence, and entrepreneurial spirit which ring so
hollow in today's context of unequal distribution of wealth and power.
These are great values -- so let's put them into practice!
Greg Burns of the Chicago Tribune recently reported that when the mayor
of Greenville Michigan "got the news that this city of 8,000 would lose
its 2,700-employee refrigerator plant to Mexico, he figured that other
Rust Belt communities facing the same sort of economic disaster would
know just what to do." So he scoured the region for examples of cities
that "had turned back the forces of globalization and kept their
industrial base intact." The mayor couldn't find a single city that was
holding on to its manufacturing jobs.
The loss of high-wage American manufacturing jobs -- one in six of
these jobs has moved overseas or south of the border in the last decade
-- reverberates throughout the economy. "For every manufacturing job
created, 2.7 additional jobs are created in other sectors, resulting in
a total of 3.7 jobs," says Dan Swinney, Director of the Center for Labor and Community Research.
Compared to factory workers -- who earn an average of $40,000 per year
in Illinois -- service sector and retail jobs don't pay nearly as well
or require as skilled a labor force. Chicago area service-sector
workers averaged $32,000, and retail workers averaged just $17,000,
according to Swinney who is spearheading a manufacturing renaissance in
the Chicago region.
The global economy is now dominated by enormous multinational
corporations that are making mincemeat out of the environment (with
obvious effects on human health), violating human-rights, and
undermining democratic decision making -- what author David Korten
calls the 'suicide economy." Maybe it's time we innovated from within
and looked closer to home for opportunities to create jobs, build
community, and reduce our impact on the environment.
Fortunately, there is a movement afoot that does exactly this. In
Philadelphia, Boston, Grand Rapids, Portland, and Toronto -- indeed all
across the United States and Canada -- a movement to humanize and green
the economy has taken hold from the grassroots and is growing steadily.
Judy Wicks, owner of the White Dog Cafe in Philadelphia says "when I
eat the food from my restaurant, I think of the farmers out in the
fields of Pennsylvania picking the fresh, organic produce they will
bring into town that day. I think of the goat herder, Dougie, who says
the cheese is better when she kisses her goats' ears! When I drink my
morning cup of coffee, I think about the Indians in Chiapas, Mexico,
who grew the beans. Business is about relationships. Money is simply a
tool." Wicks' business lies near the heart of a sustainable business
movement -- the Business Alliance for Local Living Economies
(BALLE) -- an international organization dedicated to strengthening and
spreading socially responsible local business -- where people, profits
and the planet matter.
In addition to her strong environmental ethic -- she purchases only
humanely grown meat and eggs, mostly organic produce, and uses wind-
generated electricity -- Wicks' cafe in Philly has become a community
center for other sustainable businesses known as the Sustainable
Business Network (SBN) -- a local network of independently operated
businesses in that exchange goods and services with each other while
adhering to basic principles that are good for employees, strengthen
the community and take care of the environment. BALLE is an
international unbrella network for these home-grown networks, which
have sprung up all over.
The Birth of BALLE
Judy Wicks' success with the White Dog Cafe -- where she has proven to
be a vital catalyst in her local SBN -- spurred her to promote socially
responsible business at the national level. "These companies consider
the needs of all stakeholders -- employees, community, suppliers,
consumers, and the natural environment, as well as stockholders -- when
making business decisions," she says. "At socially responsible
businesses, employees are treated better and environmental policies are
improving. They also serve as a model for other companies that may
choose to adopt their progressive policies."  Wicks witnessed the
birth of the socially responsible business movement that was gaining
momentum in the 1990's but then faltered with the buyout of companies
like Ben & Jerry's, Odwalla, Stonyfield Farm and Cascadian Farm by
large conglomerates like Unilever.
With encouragement from David Korten (publisher of Yes! magazine and
author of When Corporations Rule the World), whom she knew through the Social Venture Network, Wicks teamed up with Laury Hammel who was founder of Business for Social Responsibility (BSR). Together with economist Michael Shuman,
author of Going Local: Creating Self- Reliant Communities in a Global
Age, they created BALLE which now has affiliate networks in 22 cities
throughout the U.S. and Canada with another 20 under consideration.
Their mission is to create, strengthen and connect local business
networks dedicated to building strong local living economies.
A Local Living Economy Defined
BALLE uses the following guidelines
to define a local living economy: "A locally-owned business would be
one where the community member has full autonomy and local
decision-making authority with respect to their business practices." A
business must be privately held. Greater than 50% of the ownership must
reside in the local region. The business should be able to make
independent decisions regarding name, look, and purchasing decisions
(factors which disqualify most franchises). And the business should pay
all of its own marketing, rent, and general business expenses without
assistance from a corporate headquarters.
Living economy businesses are primarily independent and locally owned,
and value the needs and interests of all stakeholders, while building
long-term profitability. They strive to:
** Buy products from businesses with similar values, with a preference for local sources;
** Provide employees a healthy workplace with meaningful living-wage jobs;
** Offer customers personal service and useful safe, quality products;
** Work with suppliers to establish a fair exchange;
** Cooperate with other businesses in ways that balance their self-
interest with their obligation to the community and future generations;
** Use their business practices to support an inclusive and healthy community, and to protect the environment.
Shuman calls it the 'Smal-Mart revolution'. He divides the economic
universe into two groups affectionately named TINA and LOIS. TINA
stands for "there is no alternative" -- the business-as-usual model of
"get big and dominate the market by any means necessary so long as it
returns a profit to shareholders." LOIS stands for locally owned import
substituting development. TINA requires no further explanation -- we
live under its hammer daily. Let's explore LOIS further.
Import substitution is simply another way of saying "keep your
purchases of goods and services as local as possible." According to
BALLE, what is 'local' depends on the kind of community -- rural, urban
or suburban -- in which the business is based. Local could mean your
local tax entity (township or suburb); in a larger city local could
mean both the greater metropolitan area and the local business district
neighborhood, depending on the situation. In a rural setting, one or
more neighboring counties could be considered local.
Ownership can be one of several types as Korten explains, "Living
economy enterprises may be organized as partnerships; individual- or
family-owned businesses; consumer- or producer-owned cooperatives;
community corporations; or companies privately owned by workers, other
community members, or social investors. They may be for-profit or
"There is no place in living economies, however, for publicly traded,
limited liability corporations, the organizational centerpiece of the
suicide economy," says Korten. "This corporate form is legally
structured to allow virtually unlimited concentration of power to the
exclusive financial benefit of absentee shareholders who have no
knowledge of, or liability for, the social and environmental
consequences of the actions taken on their behalf. It is a legally
sanctioned invitation to benefit from behavior that otherwise would be
considered sociopathic -- even criminal."
Advantages of LOIS over TINA
The more times a dollar is recycled (saved, invested or spent) within
the local community, the more jobs, healthcare, education,
transportation, housing, and other beneficial services that dollar
creates for the local community. LOIS is about keeping dollars in the
community -- what Shuman calls "plugging the leaks." Shuman gives the
example of Borders Books in Austin Texas -- spend $100 at Borders and
just $13 remain local vs. $45 -- triple the benefit -- if the $100 is
spent at an independent bookseller; LOIS creates jobs, improves human
health and strengthens the community.
So the way to get started down the LOIS path is to survey the local
economy looking for places where dollars leave town -- then plug those
leaks. It's a new model for local economic development, based on the
idea that a dollar recirculated within the community does every bit as
much good as a new dollar brought in from outside.
TINA is costly to the community in economic terms. On the front end,
cities are constantly offering big tax breaks to large companies in
return for future jobs and tax revenue that the business promises to
generate. Shuman found that Lane County Oregon was shelling out $33,000
for each TINA job created, vs. $1500 for each LOIS job.
On the back end, driven solely to maximize profits, TINA businesses
will pull out of a community as soon as it is more profitable to
relocate elsewhere. In July 2005, according to the AFL-CIO, American
manufacturing jobs fell to 14.3 million -- lower than in 1945. The
U.S. has lost over a million jobs in the last decade due to the
'destructive exit' of publicly held companies -- a scenario that is
difficult to imagine with a LOIS business because local ownership means
local ties that bind. Take the Green Bay Packers football team. The
eighty-six year old team was born and bred in Green Bay and will remain
a local fixture in perpetuity because the articles of incorporation
require that the proceeds of any sale of the team remain local. The
Packers will remainin Green bay forever, pumping millions of dollars
into the local economy. There's zero chance the Packers will move the
Ecological and social advantages of the LOIS economy abound. In the
LOIS model, all goods and services travel shorter distances. Worker's
commutes are shorter so they have more time for recreation, family and
community service. People are healthier, happier and more productive
which in turn benefits their employer, family and community. There is
less pollution and congestion -- the air, water and food are cleaner --
and there are more resources (money and time) for education,
entrepreneurial ventures, charity, and community development. These all
feed back on themselves to build healthier and stronger communities
Shuman admits that despite its ancient roots -- most human ventures
have been LOIS style businesses since the dawn of civilization -- to
convert a modern economy to a LOIS model requires planning and
investment. And he consistently finds that communities have more
financial resources (pension funds, retirement accounts, venture funds,
etc.) than they knew -- it's just a matter of being creative and
choosing to invest the available resources locally. (This is part 2 of
a local survey: figure out where the dollars are leaking out of town,
then find out what investment resourc reside in the community, then put
them to work creating LOIS businesses. It's not simple, of course, but
it's definitely doable.)
While LOIS economies should be self-sustaining once they get
established, TINA economies have several Achilles heels. Consider
developing countries like China that produce much of the stuff we
consume. As China democratizes, its workers are eventually going to
demand higher wages. Simultaneously, climbing oil and energy prices
will drive up transportation costs, so tee-shirts and hair dryers at
Wal-Mart are going to become more expensive. "The net result," says
Shuman "Will be a double whammy for big box retailers and national
chains that depend on cheap foreign labor and cheap oil for
transportation." Shuman predicts that many TINA economies will
self-destruct when local goods become as affordable as those made
overseas. So long-term trends are favoring LOIS.
If BALLE is such a great idea, why didn't we think of it before? BALLE shares some similarities with both the American Independent Business Alliance(AMIBA) and Co-op America.
AMIBA, founded in 1997, is focused on the shared community benefits of
networking local independent businesses and does not appear to promote
social responsibility. Co-op America is a much larger and older (formed
in 1982) network of socially responsible businesses: taking a
responsible approach to the environment, community and employees.
Unlike BALLE, Co-op America has national social responsibility
standards against which applicant companies are screened.
To become a member of Co-op America companies must demonstrate that they:
** Focus on using business as a tool for positive social change;
** are "values-driven," as well as profit-driven;
** are socially and environmentally responsible in the way they source,
manufacture, and market their products and run their offices and
** and are committed to and employ extraordinary and innovative
practices that benefit: 1) workers, 2) communities, 3) customers, and
4) the environment.
Thus BALLE does fill a unique niche with an emphasis on the advantages
of local ownership, geographic proximity and social responsibility.
There is certainly much overlap between the three organizations and
they can all learn from, and support, each other.
There is no doubt that a U.S. economy based on local living economies
would be more sustainable than our current system. Industry would not
have nearly the incentives it does today to externalize costs to human
health and the environment. (Owners of locally-owned business by
definition are members of the community, where simple peer pressure
definitely comes into play.)
But the fundamental questions of resource distribution and limits to
growth remain. If we are going to survive as a species, we must create
an economy that lives in equilibrium with the rest of nature -- a steady state economy.
To achieve steady state, we must first achieve zero population growth
(ZPG). Then we must equitably distribute the resources of the commons
so that everyone has a vested interest in preserving the commons -- and
we must find a standard of living (energy throughput) that doesn't
borrow from future generations.
The developed world has effectively reached ZPG. And we know from the work of William Rees (see Rachel's 537 and 627)
that the world can only support about 6 billion people (an ecological
footprint of about 4.5 acres [2 hectares] per person. The average
American today lives with a footprint of 24 acres (9.7 hectares).
Therefore we would have to reduce average consumption five-fold to be
sustainable and equitable. This is absolutely doable. We will either
make the choice by free will, adopt regulations that force us to do so,
or face the natural consequences of social unrest and very likely
ecological collapse. It's clear that free will is the most desirable
choice. The question remains how to motivate a culture of consumers to
see beyond their growing waistlines.
In any case, the environmental movement can regain its luster in the
eyes of the public by forging alliances with the "local living
economies" movement. The LOIS approach to local economic development
can create jobs, stabilize communities by anchoring the economy around
locally-owned businesses, protect nature, and improve quality of life.
It's a winning combination.
 Jack Rasmus, The War at Home: The Corporate Offensive Against
American Workers and Unions from Ronald Reagan to George W. Bush (San
Ramon, CA: Kyklos Productions, 2006). ISBN 0977106202
 Gar Alperovitz, America Beyond Capitalism: Reclaiming our Wealth,
Our Liberty, and Our Democracy (Hoboken, N.J.: John Wiley & Sons,
Inc., 2005). ISBN 0471667307a
 Robert Pear, "Health leaders Seek Consensus Over Uninsured," New York Times, May 29, 2005, pg. A-1. Available here.
 Greg Burns, Greg Burns, "The Broken Heartland: Greenville, Mich.;
City left in the cold as refrigerator factory closes," Chicago Tribune,
November 6, 2005.
 Dan Swinney, The Chicago Manufacturing Renaissance, Center for Labor and Community Research, July 28, 2005. Available here today.
 Frances Moore Lappe, Democracy's Edge: Choosing to Save Our Country
by Bringing Democracy to Life, (Hoboken, NJ: Jossey-Bass, 2005). ISBN
 Jim Slama, "How enlightened businesspeople are changing the world at the local level," Conscious Choice, May 2003. Available here.
 Business for Social Responsibility (BSR) was originally a
grassroots organization of socially responsible entrepreneurs from
companies like Ben and Jerry's, Patagonia and Tom's of Maine. In the
early 1990's it was hijacked by big business interests and eventually
forced Hammel out according to Russell Mokhiber and Robert Weissman,
"Hijacked: Business for Social Responsibility," CommonDreams.org,
November 3, 2005. Available here.
 David C. Korten, "Economies For Life," Yes! Magazine, Fall 2002. Available here. See also David C. Korten, When Corporations Rule the World (San Francisco: Berret-Koehler Publishers, 1995). ISBN 1887208003
 Michael Shuman, "The Smal-Mart Revolution," talk given at Loyola University of Chicago, Center for Urban Research and Learning,
September 13, 2005. See also Michael Shuman, Going Local; Creating
Self-Reliant Communities in a Global Age (N.Y.: Free Press, 1998 ISBN
0684830124.) and his forthcoming book, Local First; How to Strengthen
Your Community Economy.