Local business “pollinators” are revolutionizing economic development

For years, economic development has focused on attracting existing businesses to build or move to your state or city.  A new book from Michael Shuman challenges the track record of multi-million-dollar tax incentives and points instead at the rapid spread of “business pollinators” that spark local business ecosystems to life, creating far more jobs without relying on public funds to do so.  In fact, the fight among several “suitors” for a new factory or a movie production generally doesn’t create any new jobs for the national economy; indeed, existing companies have shown a net loss of jobs in recent years, while new small businesses have been the primary source of new job creation.  We’ve long appreciated Shuman’s efforts to spotlight the powerful effects of what we call the Close to Home investment strategy, and this new book shows the way forward in exciting detail.  Click through for some key excerpts and more info.

The Local Economy Solution is published by Chelsea Green; the book’s website includes a free download of the introduction, from which we grabbed these first hints of its message.

I call this new generation of self-financing, economic-development businesses pollinators. In nature pollinators like bees, butterflies, or bats carry pollen from plant to plant, and they instinctively know that the intermixing of these pollens nourishes the entire ecosystem. Pollinator businesses similarly carry the best elements of one local business to another, thereby fertilizing all local businesses and creating a healthy entrepreneurial ecosystem.

To extend the analogy a bit, economic development today is the opposite of pollination. It brings into communities invasive species, with little consideration about how these corporations might systematically destroy the local ecosystem.

This book is about how economic development can and should be done differently. If we were to focus the field on growing locally owned business, we could increase the effectiveness of economic development and reduce its price tag. In fact, if we replicated the two dozen models described in the chapters ahead, economic development ultimately could be done by the private sector and at virtually zero cost to the public. A growing number of small, private businesses are now beginning to carry out the most important functions of economic development. They are facilitating local planning and placemaking, nurturing local entrepreneurs, helping local consumers buy local and local investors finance local business. And most remarkably, by charging clients reasonable fees for their services, they are able to cover their costs. These successes, however, and the opportunities they present to states, counties, cities, and towns everywhere, are practically unknown. They are crowded out of the headlines by the farcical antics of economic development as actually practiced today.

It’s especially interesting to see Shuman challenging not just mainstream economic development, but also the pitfalls of the volunteerism and philanthropic approach taken by many of the pioneers of localization, including the organization he worked with for years, the Business Alliance for Local Living Economies (BALLE):

I’m equally concerned about the dependence on outside cash in the various networks embracing local businesses. While charitable dollars helped many of these organizations get on their feet, the eventual goal should be self-sufficiency. Yet dependence on government and charitable funding defines those economic developers practicing Economic Gardening, a movement launched in Littleton, Colorado, which nurtures small, young, local, fast-growing “gazelle” businesses. It infuses the practi- tioners of Main Street projects and downtown revivals across the country. And it continues to beset the nearly two hundred local business alliances that are affiliated with the Business Alliance for Local Living Economies (BALLE) and the American Independent Business Alliance (AMIBA)—a shortcoming for which I must take some personal responsibility.

My worry is that overreliance on dues and philanthropy led many once-strong local business networks, in Portland (OR) and Santa Fe (NM), for example, to shut down their operations. Others struggle to raise enough money to support just one full-time staff person. How long can even the most dedicated organizer donate time to a good cause before his or her personal needs (a house, education for the kids, retirement) kick in and the looming prospect of burnout compels calling it quits? One motivation for writing this book is to help my colleagues in BALLE, AMIBA, Main Street projects, and Economic Gardening, as well as their counterparts worldwide affiliated with groups like Transition Towns, rethink their organizational designs, become more entrepreneurial, create more economically stable models, and ultimately grow bigger.

So who are these “pollinators” that can show us another way?

After my talk, in which I spoke about eye-popping economic-development incentives that were now paying upwards of $1 million per job, an avuncular gentlemen with the gift of gab—the only person in the room in a suit and tie—came up to chat. He confided that he was producing jobs for about $500 each. The previous year his nonprofit, Valley Ventures, with an annual budget of about $150,000, had generated between three hundred and five hundred jobs. My jaw dropped….What accounts for Stein’s stunning success? It’s simple. He focuses laser-like on local business. He organizes meetings of entrepreneurs. He visits existing small businesses. He finds out exactly what they need to succeed, and then methodically delivers carefully tailored assistance to them. “I can’t tell you,” he fumes, “how many economic developers never go to existing businesses and ask ‘how can I help?’”

After introducing these larger themes, The Local Economy Solution drills into the details, profiling two dozen pollinators, each one focusing on a specific key function: planning pollinators (who step back to gather necessary local data and consider design issues that can invigorate a particular place), people pollinators (businesses that support entrepreneurs), partnership pollinators (fostering local networks of businesses), and purse pollinators (bringing capital into local businesses).

The overarching model is similar to the company in the previous pull-quote: like bees and butterflies, all these business pollinators should be able to make their own livings while fulfilling their pollination function.  Rather than relying on public economic development funds or philanthropy, Shuman charts the way forward for a local economy ecosystem that includes its own built-in growth nodules.  He recognizes the challenges of this path, noting that most of his pollinator examples are relatively new, still facing all the hurdles of any young business and often not yet breaking even.  But beyond the 20+ initiatives he builds his narrative around, he notes that during the past year he’s learned about nearly a hundred similar initiatives around the country, each one pursing strategies crafted for their particular locality, and at the same time charting a path that will, over time, add to our understanding of what works best, what has not worked, and what new approaches might be considered as we continue to take step after step toward reinventing economic development.

The Local Economy Solution could become a crucial new resource for resilient investors who are looking for ways to work with others in their communities (putting their time and energy to work in Zones 4 and 7 of the Resilient Investing Map), and even more so, for those seeking inspiration and examples for launching their own pollinator enterprises, which would fall into Zone 2, your workplace and career.  As Shuman stresses, we need to find ways to take this important work out of the volunteer/grant-seeking ghetto, and build small businesses that become catalysts for countless others in local communities nationwide.  We always encourage resilient investors to focus their Zone 2 efforts toward finding work that serves the greater good as well, and this book highlights some of the most exciting new models for this kind of engaged entrepreneurship that we’ve seen.

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