While Place Still Matters - A Localist Agenda

Ninth Street in Durham, North Carolina is a district that bookends the Duke East Campus on one side with the Brightleaf Historic District on the other.

Together they serve as more linear “main drags” do at other university towns, but they are so much more.

In his research that first identified the importance of districts like these to creative class centers such as Durham, Dr. Richard Florida characterized them as “indigenous” and “organic” “smorgasbords.”

Try as they may, local governments and master planners, including developers, can’t recreate these districts.  But without a “localist” policy agenda that protects these habitats for local, independent businesses they can, however, unwittingly help destroy them.

Those in my former field of visitor-centric economic and cultural development must walk a narrow line when promoting these fragile districts as key parts of a community’s personality and appeal. 

This promotion also draws the attention of chain-reliant developers who hope, in an all too often fatal attraction, seek to cash in on the success of these districts, such as three are doing now along Ninth Street, by adding a hotel, several chain restaurants and a supermarket.

To their credit, the new developments have made a special and very savvy effort to pick up the design personality of Ninth Street, including the remnant of the historic textile mill at its center and for which the district was born.

Surrounding neighborhoods, merchants and university leaders worked with Durham City-County Planning to create a Ninth Street Plan.  A few weeks ago the City Council approved tax increment (or self) financing for a million dollars of improvements, hopefully including period lighting and removal of telephone poles along the district.

But mostly these deal with appearance, the hardware of districts.  Their survival relies even more on the software side including programming, a healthy ratio of local, independent businesses to chains.

In 1991, just 25 months after I was recruited here to jump-start Durham community’s destination marketing organization, I clipped a column (pre-Internet) by Dennis Rogers, a veteran columnist and editorial writer for the newspaper over in Raleigh, a rival metro area east and south of Durham with shared ownership of an airport located midway between.

Rogers, who retired two years before I did grew up further “down east” which is what we call the coastal plain of North Carolina.  Although, we never met, his six years on the road after retirement gave me inspiration for my many cross country trips once I did.

He always seemed to take an interest in Durham, I suspect because it has always been more genuine and authentic by nature, and in that 1991 column I clipped, he noted something that I wish Durham officials including me had taken less for granted:

“Ninth Street is what Chapel Hill’s fabled Franklin Street used to be.  It is sometimes pretentious but always charming and the last hide-out for social outlaws.  I like it a lot.”

Rogers could sense that Franklin Street in Chapel Hill, a college town that lies within the metro area centered around Durham was inalterably changing because a trendy Gap clothing store was due to open there the following year.

A decade later the chain store was gone but the damage to the Franklin Street ecosystem was done and now after another decade of observations by experts and studies by consultants leaders there have yet to figure out how to restore it.

By definition, being organic can’t really be planned when it comes to districts.  The harder some try, the more apparent the distinction becomes.

Only time will tell if the developments along Ninth Street will do the same to the small, locally-owned and independent businesses there.  I hope not.  In Durham, we’re all hoping not, none more so than the developers.

But instead of just congratulating ourselves on hopefully “dodging a bullet,” officials in Durham would be well advised to aggressively pursue a more proactive and comprehensive “localist policy agenda” before it is too late.

A few months ago, Stacy Mitchell, a senior researcher for the Institute for Local Self-Reliance delivered a speech in Buffalo, New York entitled “Toward A Localist Policy Agenda.” (Click to view her slides, as you read the transcript.)

Number 3 on her list of 7 recommendations is to “adopt planning policies that create great habitat for local businesses.”  San Francisco is cited as a best practice because it carefully safeguards a mix of chain or what are called “formula stores” in that city’s unique districts such as Ninth Street is for Durham.

Think of it as being similar to limiting the over concentration of liquor licenses and convenience stores.  In some SF districts chains are prohibited entirely.  In most cases, the ordinance just makes sure other businesses and residents are notified and have a voice in, or as activists did in Durham, an opportunity to shape approvals.

San Francisco has maintained a far more healthy ratio of independents to chains than other cities, yet in the first four years of the ordinance of the 37 applications received, 23 were approved and only six were withdrawn for lack of support.

The process merely sensitizes developers to a healthy mix of both local, independent businesses and formulas.

During my few months in San Francisco in the late 1980s, I lived in the Marina District (which was hit hard by the earthquake that occurred during the World Series a few months after I had resettled in Durham.)  It was only one of many unique and indigenous districts I frequented, each with a different personality and mix.

Durham’s hands may currently be tied by the Republican-controlled State General Assembly that seems bent on restricting innovation in cities, towns and counties by prohibiting them from doing anything not sanctioned by the state.

This is, in effect, a reversal of the claim that party uses to promote innovation among the states as an alternative to top-down policies from the federal government.

But until that changes—and it will—Durham can take up another part of Mitchell's “localist” policy agenda and begin to “collect better data and set benchmarks.”

Durham can appeal to an organization called Civic Economics to become one of a number of cities across the nation that are documenting the impact of and threats to local independent businesses such as this analysis for Grand Rapids, a community in Durham’s peer group.

Better data would help Durham know where it falls on the group’s “Indie Index.”  Currently, the four-county MSA for which Durham is a center ranks as “chain-oriented” and far below the national average for the proportion of local, independent businesses.

The existence of unique districts such as Ninth Street is correlated to being appealing to talent clusters such as the creative class and subsequently to business expansions and relocations that pursue them.

But there is so much more at stake.

Nearly 70% of the US economy is related to consumption.  An in-depth analysis of the economy of the Province of British Columbia released earlier this year by Civic Economics showed that independent retailers and restaurants recirculate 2.6 times as much revenue into a local economy as chain competitors.

“A shift of just 10% of the market there from chains to independents would produce 31,000 jobs paying $940 million in wages in BC workers.”  Maybe Governor McCrory would be well advised to jump on having a similar analysis performed for North Carolina.

If officials are complacent about a “localist” economy centered on independent businesses, particularly in places such as Durham where sense of place is still apparent, it may be that we suffer from what cognitive researchers such as Dr.Daniel Kahneman call “availability bias.”

This is where people use mental shortcuts or heuristics to make decisions that dismiss or underestimate a risk just because they haven’t experienced it or detected something such as losing an ecosystem of locally owned and independent businesses.

Or maybe it is because for decades, traditional supply-side economic developers viewed “commercial” as a byproduct rather than as the core element it is to demand-side economic developers such as I was.

One of my favorite blog posts was expressed by Harvard psychology researcher, Dr. Dan Gilbert, on the final day of my career four years ago  entitled “Times to Remember, Places to Forget.”

Lamenting that without local independent businesses and experience to help make experiences unique, we are left:

“..marinating in memories that happened everywhere but not somewhere, reliving experiences that are located in time but dislocated in space.” 

“Ours may be the last generation of Americans to suffer for return — to remember events that took place when place still mattered.”

The Failure to Link “Buy Local” to ROI

There were two conditions I had to meet before I could participate in my first roundup on the cattle ranch that had been homesteaded in my native Idaho by my paternal great-grandparents and grandparents and then run by my parents.

First, I had to graduate from drying the dishes after dinner to taking a turn from a step stool at washing them.  Second, I had to get past my fifth birthday.  I eagerly achieved both goals.

This year, the overall cattle herd in the United States is the smallest its been since 1952, the year before my inaugural roundup when our population was half what it is today.

Ours was a small, independent family operation.  Our 500 head of cattle were range-raised, grass-fed and free of the low-dose antibiotics so controversial today because when ingested as food, it lowers our response to those drugs when we need them.

The livestock cattle we grew were “Shorthorns,” ironically a breed improved from cattle that were namesaked for Durham, England, a sister-city to my adopted home of Durham, North Carolina.

In 1946, two years before I was born and as my parents were acclimating after my father’s return from serving in the 35th Tank Battalion, some of the first studies were documenting the importance of independent, locally-owned businesses like the ranch.

My now-concluded career helping to grow local business climates may have even been inspired by watching my parents run that ranch.

I was disappointed, but not surprised, when the American Tobacco Complex in Downtown Durham, which has been boosted by nearly $100 million from Durham taxpayers, elected recently to import a Raleigh restaurant to handle its event catering here, a snub that will be felt by many living in Durham, “The South’s Tastiest Town.”

This move essentially exports not only all of the catering revenue out of this local business climate but also many ancillary purchases such as equipment rentals and related economic impact into another business climate…the one where the owners are based.

Being successful at business is no guarantee of a grasp of the fundamentals of community economic development.

Many communities such as Durham fail to build “buy local” stipulations into agreements when they incentivize developments.  In some cases they may have their hands tied from doing so by state legislation, further undermining the very fundamentals of community economic development.

Even when they could have, officials and advocacy organizations often act instead as another developer-friend put it recently “like a desperate tween with an ‘oh-my-god-I-could-die’ crush who considers his/her world near-over when the object of desire doesn’t text back in 10 seconds.”

Also playing a role in this failure to connect the dots could be the decision-making by those who now hold two out of three jobs in Durham but don’t make this community their home.

One of the breakthrough studies validating the importance of buying local was conducted about the time I was born in the late 1940s by Dr. Walter Goldschmidt, a UC Berkley-trained sociologist and anthropologist attached to the Bureau of Agricultural Economics of the United States Department of Agriculture.

His study found that all else being equal, small or mid-sized ranches and farms like my family’s promoted higher quality rural communities than large farms and livestock growers.  A similar study at about the same time found that smaller businesses had the same effect on manufacturing communities.

According to Stacy Mitchell of the Institute for Local Self Reliance (ILSR,) under the sway of large agribusinesses, USDA officials actively suppressed Goldschmidt’s analysis and Congress ignored the study on manufacturing businesses, much like “desperate tweens” I suppose.

Goldschmidt, who later taught and researched at UCLA passed away in 2010 at age 97.  Coincidentally, our paths would cross again during my career in community-destination marketing when I was stationed in Anchorage, Alaska beginning in 1978.

He had also conducted the research that informed the 1971 Alaska Native Claims Settlement Act that paved the way for the Trans-Alaska Pipeline which had begun operation a few months before I arrived there.

The challenge for Alaska and Anchorage has been to leverage the impact of those developments into greater economic self-reliance.  That has meant buying local as a means to expand capacity and reap a full share of economic impact.

They had to learn stand up to Seattle just as Durham has had to stand up to Raleigh in order to foster a stronger local business climates and tax bases.

A few months ago, ISLR published its 6th annual Independent Business Survey with data gathered from nearly 2,400 independent, locally owned businesses across America, employing more than 37,000 people..

Half are retailers and half are a mix of service providers such as banks, farms and ranches, manufacturers, restaurants, wholesalers etc.  Two-thirds have five or fewer employees while only five percent have 50 or more.  This is much truer to small business than the federal government definition.

According to the report, places such as Durham with a grassroots “buy local” initiative saw these businesses grow more than two and a half times the rate of those elsewhere.

The survey found that “showrooming” was a significant challenge to independent, locally-owned businesses.  This is where people window-shop in local stores but buy later online.  Financing is still an issue as well.

But a major issue is that policies such as corporate subsidies, tax loopholes, and others give unfair advantages, or even fail as Durham did with American Tobacco, to connect the dots about the importance of using local businesses as part of its return-on-investment to the taxpayers.

As more and more communities pursue sustainability and the triple bottom line, it will be essential to also connect the dots for economic developers and officials about the importance of independent, locally-owned businesses.

The Same Ole’ Enemy – 239 Years Later

Taking a long-view of economic history is another way to pinpoint the fact that climate change is a direct result of human activity.

Years before it would be confirmed by Berkley Earth by scientists who were skeptical about climate change but who found the link after going over data from the last 250 years, one could see the link pinpointed in the work of economic historians such as the late Dr. Angus Maddison in his book entitled Contours of The World Economy 1-2030 AD.

Berkley Earth reconstructed climate data to make their link, while Maddison reconstructed economic growth over three millenniums to find a pattern.  He learned that between the years 1 and 1000 AD, around the time that another era of climate change spawned Viking conquests, people had actually become slightly poorer overall.

Between 1000 AD and 1820, economic growth was stagnant even in western Europe and spinoffs such as the American colonies and fledgling United States of America.  The surge following 1820 was brought about as the industrial revolution kicked into ever higher gears.

Ironically, the seminal Boston Tea Party protest was not over unfair taxes but a revolt against a tax loop-hole created by the British for a “too-big-to-fail” corporation at the disadvantage of small independent merchants, some of them smugglers, as noted in this excellent TED Presentation  published on “Black Friday” by Stacy Mitchell, a senior researcher for the Institute for Local Reliance.

I agree with Republican lawmakers that there is something wrong with government but, in my opinion, size isn’t the real issue.  Making government more nimble and responsive seems much more important. Nor do I buy the part of their tightly-woven narrative that this group’s frequent stalemating is on behalf of small businesses.

I am far more persuaded that the policies that have marginalized the middle class over the last thirty years and eroded small business by consolidating almost every part of the economy into the control of a few top-heavy players has been engineered not by government or the free market but by those on whose behalf lobbyists have rigged the system.

Even the process of devising regulations has been polluted by special interests; and those who argue that regulations should be simplified are far too often only fronting for interests, such as outdoor billboard companies, eager to see these regulations further rigged to their exclusive benefit.

“Rent-seeking,” the term economists give this loathsome activity probably dates back to the 1879 book Progress and Poverty, written by economist Henry George in the early years of the Gilded Age.  George observed that poverty occurred back then when policies permitted absurd “economic rents” to be charged by monopolists including landowners resulting in an over-concentration of unearned wealth.

George proposed solutions he believed would benefit both capitalism and labor while curbing these rent-seekers.  Seven years after the book was published, George sought the office of mayor of New York City but finished behind a Tammany Hall candidate.

However, the coalition forged by George caught the attention of the third place finisher, Republican candidate Theodore Roosevelt.

Henry George had forged a coalition of groups that in a few years would become nationwide force known as the Progressive Era, which sought, in part, to curb the excesses of the Guided Age.  A variation would elect President Theodore Roosevelt and inspire the Square Deal including conservation and anti-trust.

It isn’t easy being a Republican right now.  A social network feedback-loop has the party torn between a “circle the wagons” approach and a desire to open up to alternatives.  A new poll for ABC, Washington Post and the Pew Center shows that by 53% to 27% Americans will blame Republicans if the current impasse persists.

The party would do well to study T.R., one of its greatest Presidents.  The real enemy isn’t government or taxes and it isn’t Democrats or women or minorities.  Just as it was in Boston harbor as the dawn of the American Revolution, the common enemy is still economic rent-seekers.

This issue isn’t about the 1% or the wealthy, although many didn’t earn their wealth but used rent-seeking instead.  The issue economic rent-seeking, as Joshua Brown, who blogs at The Reformed Broker, put it so eloquently a year ago is about the fact that:

• “America hates unjustified privilege,
• it hates an unfair playing field and crony capitalism …,
• it hates privatized gains and socialized losses,
• it hates people who have been bailed out and don't display even the slightest bit of remorse or humbleness in the presence of so much suffering in the aftermath
• it hates rule changes that benefit the few at the expense of the many…”

Localism Index Signals Return of Local, Independent Businesses

Below is a graphic illustrating reasons to be optimistic that “localism” is on the rebound. It has appeared in both Harpers and The Nation.

To stay abreast of this movement, click here to subscribe to The Hometown Advantage Bulletin eNews published by The New Rules Project of the Institute for Local Self-Reliance.

(click image to enlarge or click here)