Michael Shuman's Blog

Local Stock Exchanges and National Stimulus

Editor's note: Readers may recognize some of the ideas below from previous blog entries. The issue is still relevant and urgent. The following piece was just featured in the Federal Reserve Bank of San Francisco's Community Development Investment Review.

Since the global financial system unraveled in 2008, U.S. policymakers have struggled heroically to improve the performance and oversight of global banks and investment firms. But these actions have been largely unresponsive to the growing number of Americans who would like to remove their hard-earned retirement savings from these high financial fliers altogether and invest their nest eggs in their community. Might it be time for policymakers to consider the potential stimulus payoffs from nurturing micro-equity investments?

One reason for growing public interest in local investment is the spread of “buy local” campaigns, a movement that is more than just local hucksterism. Consider the title of an article in a recent issue of Time: “Buying Local: How It Boosts the Economy.” Cutting-edge economic developers (except at the national level) increasingly recognize is the importance of strengthening locally owned, small businesses.

Growing evidence suggests that every dollar spent at a locally owned business generates two to four times more economic benefit—measured in income, wealth, jobs, and tax revenue—than a dollar spent at a globally owned business. That is because locally owned businesses spend much more of their money locally and thereby pump up the so-called economic multiplier. Other studies suggest that local businesses are critical to tourism, walkable communities, entrepreneurship, social equality, civil society, charitable giving, revitalized
downtowns, and even political participation.

Despite this overwhelming body of evidence, the national stimulus efforts have proceeded with no specific attention to local businesses. Yet even some very simple reforms that opened up local businesses to local investors could make a huge difference. — read more 


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