Common Pain Should Lead to Common Purpose

It’s been said that “in a sane society common pain should lead to common purpose.” Let’s be clear about the common pain present in our District, where more than one-in-five people live at or below the poverty level. Even if you live somewhat above the poverty level, you or your family are one medical emergency away from catastrophe. Poverty is our common pain, the source of most of our problems, and only our widely shared common purpose can hope to end it.

Myth of the Texas Economic Miracle

There’s a lot of talk about the Texas Economic Miracle, but the fact is that Texas is ranked the 38th poorest state in the nation. Median family income in Texas ranks only 22nd in the nation. Median family income in our District is less than three quarters of that low measure.

It’s fair to say that most working families in our district lead lives on the edge of desperation. This is the common pain far too many of us share. What’s needed is a common purpose that squarely addresses this. The heart of our common pain is an economy that fails to support most working families in Cherokee, Nacogdoches, and Rusk Counties.

A Living Wage

Our region has strong traditions of self-reliance. Our sense of livelihood has always been based on hard work and taking care of our own needs. But it’s clear today that this proud tradition isn’t enough. No amount of hard work can overcome being paid poverty wages. Working hard, we deserve a living wage that allows us to care for our families and save money for when times get tough. Demanding a Living Wage is part of the solution, but only part.

Build an Economy That Lifts Up Working Families

We need to do more than looking after our economy so our economy can look after us. We also need to regain the political power to be able to do this in the first place.

What passes for economic development in this region is, in truth, what I call “Leakonomics.” Before I go on to explain this, it’s worth noting that we’re told that Leakonomics is the only game in town. And we’re told this by people who win this game – all the time – while our communities lose.

Ending Leakonomics

Whenever we buy goods and services produced outside our district that could be produced inside our district, we leave money on the table and jobs at the door – this is the essence of Leakonomics. We’re told that the only way to get jobs is a strategy known as “attract and retain.” “Attract” businesses from elsewhere and “Retain” them – bribe them, that is – to stay in the hopes that some good paying jobs might stick around when the dust settles. When everything is added up, what we’re mostly left with is the dust.

It would be more honest to call the “Attract and Retain” strategy “Distract and Restrain.” It “Distracts” us from understanding what would really help and “Restrains” us from pursuing better alternatives.

Support Small Locally Owned Businesses

Speaking of the better alternatives, it turns out that our best economic neighbors are our local small businesses. Almost half the enterprises in the country are small, place-based businesses, and they provide about half of our nation’s jobs.

In almost every way you can measure, including overall profitability, they are superior to non-local and often larger businesses. In fact, they enjoy at least eight advantages over non-local competitors. Generally speaking:

  1. They have higher standards,
  2. Produce greater wealth,
  3. Have greater stability,
  4. Engage in better community planning,
  5. Have stronger local identity,
  6. Display greater creativity,
  7. Generate greater social well-being,
  8. And foster greater political participation.

Main Street Not Wall Street

Small place-based businesses are more profitable than Wall Street businesses and less risky. It’s worth remembering that it wasn’t Main Street that blew up our economy in 2008. It was Wall Street and Wall Street cost us at least $20 trillion before it was over.

Small Business Advantage: Better Economic Multipliers = Better Economic Outcomes

Every job in a locally owned business generates two to four times as much economic development benefit as a job in an equivalent non-local business. Local businesses spend more money locally, which helps pump up what is known as the “local economic multiplier.” It is a key measure of economic health.

Non-local businesses that we bribe into our communities do none of this. They punch big holes in our economy from which our dollars exit and drain out while our local economic multiplier flat lines. That’s why I call it “Leakonomics.” It is a major contributor to the common pain we are struggling to overcome.

Measuring The Effect of Leakonomics

It’s actually possible to measure the amount of leakage in a local economy. I’ve commissioned two such studies – the first ever conducted in this District.

The first study gave us a great idea about how much we might gain by moving to end unnecessary leakages, but it is the second one that gives us a clearer picture district-wide and that’s the one we’ll focus on below.

Every year our purchases of goods and services in District 11 sustain over 36,000[i] jobs elsewhere. Those jobs pay almost $2 billion[ii] in wages annually. Of course we will always be conducting business beyond our borders. It’s unrealistic to think that we could plug all the leakage. A good question to ask is how much leakage would we need to plug that could end unemployment in our three counties?

Ending Unemployment in District 11

According to the Bureau of Labor Statistics, in 2016, the most recent year for which we have data, total unemployment in our District was 3,751 jobs. It turns out that if we were to shift just 10.4% of this leakage, these purchases that are creating jobs and payroll elsewhere to our own district instead – bolstering existing local businesses and creating new local enterprises – we would gain those 3751 jobs we need and bring in about $200 million in new annual salaries. This is a clear and achievable goal that would lift up working families across the district while ending unemployment.

Three Simple Rules That Allow a Community to Prosper

It turns out that the key to local economic prosperity is well understood. Michael Shuman[iii] – a trailblazer in this area, writes, “We now know three simple rules about local economies that, if followed assiduously, will allow a community to prosper.

Rule 1. Maximize the percentage of jobs in your local economy that exist in businesses that are locally owned.

Rule 2. Maximize the diversity of your businesses in your community, so that your economy is as self-reliant and resilient as possible.

Rule 3. Prioritize spreading and replicating local business models with outstanding labor and environmental practices.”

Following these three rules will be a great start along the high road that our common purpose requires us to follow. Given how every county in our district is struggling to balance budgets amidst shrinking tax bases, we must find creative ways to help us implement these three important rules.

Abandoning Leakonomics

We can make progress towards abandoning Leakonomics by answering these six questions:

  1. What are the most plausible opportunities for new or expanded local businesses to meet local needs?
  2. How can a new generation of entrepreneurs and employees be organized and trained for new local-business opportunities?
  3. How can local capital be mobilized to finance these new or expanding local businesses?
  4. How can the community help these businesses, once established, flourish with concerted buy-local efforts by consumers, business, and government agencies?
  5. How can local businesses improve their competitiveness by working together as partners?
  6. How can laws, regulations, and rules at all levels of government – local, state, national, and global – be recalibrated to eliminate the current artificial advantages non-local businesses enjoy?

Bring On the Pollinators

It turns out that five of these six questions can be answered, not by burdening local government or raising our taxes, but by promoting new kinds of businesses: pollinator businesses. Pollinator businesses exist, as either for-profit or nonprofit enterprises that succeed by helping other businesses succeed. They can help with planning, staffing, finance, efficient purchasing, and promoting effective partnerships. All without increasing taxes and while creating job opportunities that help lift up and sustain our local living economies – a true win-win for us all.

Essential Political Change

However, the sixth question – the one dealing with changing our laws and regulations – requires changes in our politics. It requires electing someone like Alec Johnson who understands the problem, has solutions, and is not beholden to those who benefit from the Leakonomics status quo. That’s why he’s running to be your next State Representative.

Leveling The Playing Field Between Main Street and Wall Street

One other very important area where we must make big changes to end our common pain is to level the playing field between Main Street and Wall Street when it comes access to equity investment capital. Equity investment capital refers to funds given to an enterprise in anticipation of its success. It doesn’t place a debt burden on the enterprise, but enhances its ability to succeed and investors, in time, profit from that success. Access to such funding can make all the difference to our local business neighbors while helping us build local living economies we can rely on.

In rough figures, every year there’s about $30 trillion worth of liquid assets held by households and nonprofits in the form of stocks, bonds, mutual funds, pension funds, and life insurance funds – all potentially available for equity investment. This kind of investment bets on the success of an enterprise without burdening it with debt. It can be hugely helpful to existing businesses ready to expand or to new enterprises eager to take off. Local small businesses amount to half of all the enterprises in the country, hiring half of all workers. However, they receive less than 1% of the available equity investment capital.

Common Purpose Should Lead to Common Prosperity

It turns out only 2% of the population gets to make investment decisions for the rest of us. 98% of us are prevented from investing in half the businesses – the half that our communities benefit from the most. If small businesses received fair access to this vast pool of funds – about $15 trillion – imagine how different our local economies could become? We calculated that if we were able to break this logjam, every county in our district would have access to about $4 billion in equity investment capital every year. Our world would be a very different place. Our common pain would give way to common prosperity.

Transforming our Common Pain into effective Common Purpose won’t lead to Common Prosperity overnight. But if we don’t begin to move in this direction, I guarantee you that as bad as things are now, our common pain will only get worse until we embrace our sacred right to pursue a common purpose of salvation.

Summary

To implement our plan to end unemployment and lift up working families, we must promote local living economies throughout our district. This includes that:

  • We must insist on a Living Wage.
  • We must fight Leakonomics at every turn.
  • We must embrace the three Golden rules that ensure local prosperity.
  • We must promote a new generation of pollinator businesses.
  • And we must liberate our fair share of the $15 trillion dollars of equity investment capital our local economies have every right to pursue.

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[i] 36,171 according to the second leakage analysis we conducted.

[ii] $1,986,279,386, also per the second leakage analysis.

[iii] Michael Shuman conducted the leakage analyses reported on this page. We are indebted to him for his generous assistance and his published body of knowledge.