This weekend saw the great dichotomy of violence and insanity on Black Friday and the feel-good local Small Business Saturday. I had a great conversation with the News Journal’s Jonathan Starkey about Small Business Saturday, and made it into his article on the event.
Inside his piece, Starkey illuminated some of the difficulty we face in highlighting the importance of small business and local economies.
In Delaware, more than 80 percent of businesses have fewer than 20 employees, according to 2008 data from the Census Bureau, the latest available. But two-thirds of workers here are employed by companies with 100 or more employees. And more than 53 percent of workers are employed by businesses with 500 or more employees, according to the government data.
The Small Business Administration says small businesses have created 65 percent of new American jobs in the last two decades. But their definition of “small business” as a company employing up to 500 workers, doesn’t exactly conjure images of a small mom-and-pop retail operation.
Let me unpack that first set of numbers, with a little additional data, to show just how precarious a position the First State finds itself. In addition to one of the highest rates of workforce in establishments of 500 or more employees, Delaware ranks #1 in the nation in residents employed by “nonresident establishments,” according to YourEconomy.org. “Nonresident,” of course, is defined as companies headquartered out of state. And, although there’s no published study to tie them together, you can bet that most of those 500+ employee locations are owned by “nonresident” corporations. The same applies to many of our newest prospective major employers like Bloom Energy and Fisker Automotive.
The moral of the story here is that, as we painfully discovered during the financial meltdown, our economy is not properly insulated against the massive speculation in the global finance casino. These out-of-state corporations have no loyalty to Delaware, and could just as easily cut jobs here as anywhere. And they have, as recently as this fall, when many longtime employees of the Wilmington Trust Company were let go by M&T Bank. Same with AstraZeneca, recipient of much government largesse over the years. Not only that, but even our own DuPont recently dedicated their brand-spankin’-new, $500 million Kevlar plant…in South Carolina. This over-reliance on large, publicly-traded and often nonresident employers, as much as anything, is why Delaware continues to lag the rest of the region in employment recovery.
It’s up to us to build the bulwark that will mitigate the impact of the outside world by further diversifying our economy. In 2009, Civic Economics conducted a study in post-Katrina New Orleans, measuring a hypothetical SuperTarget store against a group of locally-owned businesses occupying the same square footage. Their findings (PDF Link):
The average supercenter format Target occupies 179,000 square feet and achieves sales of $282.51 per square foot, yielding total store revenue of approximately $50 Million.
Participating businesses report total sales per square foot of $587 per retail square foot. Therefore, 179,000 square feet would generate an estimated $105 Million in annual sales revenue across as many as 100 individual stores.
Total recirculation of revenues for the hypothetical SuperTarget store was 16 percent and total recirculation of revenues for Magazine businesses was 32.1 percent. Therefore, in aggregate, locally-owned participating businesses return dollars to the New Orleans economy at approximately twice that rate.
This report built on prior studies from Civic Economics in other areas of the country (Chicago, Phoenix, Grand Rapids, San Francisco), which all found to varying degrees that the multiplier effect of local spending is dramatic and real.
We can create a prosperous, diverse, sustainable local economy, but it’s up to us to do so. And we must act fast, because it appears that another massive financial crisis is being foisted on us from the parasites in the financial sector, who add nothing to the world but extract a huge sum from it. In fact, it was just reported that there are over $700,000,000,000,000 in outstanding over-the-counter derivatives out there, more than ten times the value of global GDP. So a hard rain’s gonna fall, again. But we can create a true hedge in our local economies.
We must consciously choose, and if we do, the rewards will come. We need our major employers as part of that diversity, and I recognize that tens of thousands of Delawareans rely on them for their employment. But over time, we need to regain control over the future of our own economy as a hedge against the speculative finance sector, hopefully not before it’s too late. The more local control of our economy we have, the stronger and more resilient we will be.
Buying local doesn’t just feel good. It is the only true option left to heal the economy and restore communities. So while it’s nearly impossible to buy everything local, it’s not impossible to briefly consider your local options before you buy – today, tomorrow and everyday.