Berrett-Koehler Publishers, Inc., 2006. 285 pages; $24.00
In his new book, The Small-Mart Revolution: How Local Businesses Are Beating the Global Competition, Economist Michael Shuman (KNFP 8) debunks the myth that ”there is no alternative” to big-box chains for communities seeking economic health. Despite the discount stores’ omnipotence, Michael writes, ”Almost everyone who has taken time to study the situation now knows what a death star the big box on the edge of town is.”
Wal-Mart, the behemoth of the discount chain stores, with 5,000 outlets in 10 countries, generated $258 billion in 2003, or 2 percent of U.S. gross domestic product. Yet, Michael points out, ”every dollar I decide not to spend at my local businesses and instead surrender to Wal-Mart saps just a little bit of vitality from my community, all for bargains that turn out to be largely illusory.”
According to one study he quotes, counties who have had a giant discount store for a decade or more have become poorer compared to counties without the discount stores. For instance, an average store clerk at Wal-Mart makes just $8.50 an hour, and many workers live in poverty. A recent congressional report found that Wal-Mart workers qualified for $2.5 billion in federal welfare assistance. This means, he writes, that ”every taxpayer, including those businesses paying their workers decent wages, is effectively footing the bill for Wal-Mart’s low prices.”
But the success of the discount chains and the demise of the small, local businesses can be attributed to more than the much-touted low prices and convenience of the big box stores. Michael points to a profusion of laws and public policies that actually disadvantage small and local businesses and subsidize the large chain stores, by more than $50 billion per year at the state and local level, and $63 billion per year at the national level.
At the local level, millions of dollars are wasted luring outside businesses, while at the same time these communities are ”making themselves vulnerable to the erosion of self-governance and to the weakening of participatory democracy.” By way of example, Michael points to two powerful poultry companies, Tyson and Perdue, on Maryland’s Eastern Shore. Both companies have ”successfully fought efforts to raise workers’ wages or clean up billions of pounds of chicken manure dumped into the Chesapeake Bay ecosystem by deploying one powerful argument: regulate us and we’ll move to more lax jurisdictions.”
In describing his theory of the Small-Mart Revolution, Michael challenges some of the core assumptions in the economic development community. As an alternative, he touts a theory rooted in ”local ownership and import substitution”, or ”LOIS” for short. He describes eight global trends that show how LOIS is a far better basis for economic development, and explores what various constituencies, consumers, investors, entrepreneurs, and policymakers, can do to accelerate the Small-Mart Revolution.