Last Monday I had the opportunity to hear Michael Shuman talk on “Pollinating Prosperity” which advocates a local economy solution as a new direction for economic development in Adelaide.
Michael has very strong credentials in this field and what he has to say resonates strongly with local government economic professionals, this one included.
His concern is that the focus of economic development is on attraction and retention rather than helping local businesses grow.
This can be irrational, particularly if the sums being thrown to attract big business are enormous – he cites an example in the USA where $137 million was offered to entice an overseas company which would have provided around 190 jobs: $717,000 per job !
A better result could have been achieved if they flew in tourists and gave them some spending money to buy local produce.
An alternative method to attraction and retention
Michael outlined an alternative approach with 4 rules:
- Maximise local ownership – a dollar spent locally has over double the income and tax effects than spending on non-local
- Maximise local self-reliance – this does not infer a closed economy but rather, one which can evolve with the capability to engage nationally and internationally. He cites the Zingerman’s story, a delicatessan that needed to grow to retain good managers. Rather than expand horizontally ie more of the same, it chose to deepen its growth by establishing new businesses associated with its traditional business expertise eg bread production evolved into sandwich production; customer service spawned a training business; ice cream and cheese led to a creamery: in all, 10 new independent businesses were established that collaborate around brand. The key learnings were that this was done by private business and the focus was on the cluster/points of competitiveness.
- Spread models of triple bottom line businesses – setting high labour and environmental standards
- Create an entrepreneurial eco-system – this is where the “pollinators” come in: planning pollinators who work with local businesses to reduce their business overheads (eg through interrogating business invoices to determine who is being ‘overcharged’ and subsequently arrange a better deal); people pollinators who work intensively with businesses and then take a stake in the business as their fee (the business can buy them out); partnership pollinators (eg organising to buy supplies in bulk to secure discounts); purse pollinators who harness local savings for local investment; purchasing pollinators who spearhead ‘local first’ campaigns; policymaking pollinators who work to remove anti-local bias
These can apply to towns/cities of any scale and socio-economic status.
Michael was keen to point out that this is not about preferencing local business but about ensuring their potential is maximised through working to their strengths and removing bias.
And what of the role of government, particularly local government?
Primarily it is to ensure policy/regulation is no cost or low cost; undertake local procurement (where it makes sense); advocacy, particularly in the area of finance such that banking and securities laws allow local money to go into local businesses; and the collection and dissemination of information.
Michael’s thesis certainly resonates in South Australia when, as Dick Blandy highlights (InDaily 8 March 2016):
The top-hat capitalist era has gone for keeps in South Australia. The last remnant here of the Big End of Town, Santos, is hanging on by its fingernails in a low-priced oil world that nobody predicted.
All the rest of the big battalions that remain depend on decisions taken elsewhere, including in Canberra. Mitsubishi has gone, Holden is going, SA Power Networks is run from Hong Kong, Olympic Dam is run from Chile, the destroyers and submarines depend on Canberra. Nearly all that we have left that is truly ours is small to medium sized firms (other than the real giant – the South Australian Government).
Michael eschews the resort to government funding to support the activities of pollinators, arguing that it needs to be done entrepreneurially where the pollinators are funded through their success in supporting local businesses.
In general, local government in South Australia has focussed on local business development, given that it accounts for most of the local investment that supports growth and jobs.
However, different Councils approach it differently but most with the expectation that it will be treated as a government subsidised service. In my role as an economic development professional in local government I have worked within this paradigm. It has had its successes but remains at the whim of government funding policy which can be fraught and management of the programs can become polticised.
A new and fresh approach to economic development is required in this State – Michael Shuman has provided us with an outline of a model worthy of further consideration.by