As a former mayor of Santa Cruz, California, I have had a sustained interest in alternative investment strategies for local communities. Most of the proposals I’ve studied and worked on tend to be either unrealistic about the ability of local communities to function outside of the larger capitalist system, or overly optimistic about the likely economic success and impact of alternative community institutions. But Michael Shuman, in his recent book Local Dollars, Local Sense, presents extensive and concrete examples of local communities that are redirecting the investments of ordinary Americans away from Wall Street and back to local community and small business.
What is most exciting and useful about Shuman’s current book is its focus on a frequently overlooked economic question: how can local communities create opportunities for individuals and groups of individuals to become the source of investment capital? An answer to this could, ideally, sidestep the challenge presented above. This is what Shuman tries to do.
Indeed, local communities can create new kinds of investment opportunities for working people by “tearing down the archaic regulations that prohibit ordinary Americans from investing in ordinary business,” argues Shuman. In many ways, his strategy parallels the microloan programs that have been, by and large, successfully developed and rolled out in third-world countries. But his suggestions reach further—a microloan program on steroids.
I found myself continually reflecting on the fact that many of his ideas could well be introduced into my own community of Santa Cruz, or similar small towns around the United States. Whether he is talking about expanding the role of cooperative or worker-owned businesses, redirecting pension fund investments from Fortune 500 mutual funds to local small businesses, or creating community banks, his examples are far more realistic than most of the ideas I studied (and rejected) during my 30 years in public office.
The book compellingly demonstrates how investments in local enterprise can result in rates of return as high or higher over the long haul than investments in the stock market. He also clearly outlines how the national regulations concerning who can be an “accredited investor” under Securities and Exchange Commission rules perversely block individual and institutional lending to local enterprise. He targets specific regulation for reform and demonstrates how much could be gained from such reform.
Ultimately, the book healthily balances actions that the readers can take within the existing regulatory and economic arrangements and actions that would require reforms to the current regulatory regime. I was hugely impressed with the number of concrete examples of communities already beginning to implement some of the programs that he outlines.
There is no local public official or local community activist who would not benefit from reading this book and then meeting with others of like mind to discuss which of Shuman’s ideas could most effectively be implemented.
I only wish I had seen a copy at the beginning, rather than the end, of my career in public office.
In some ways, Local Dollars is a torchbearer of ideas that the Santa Cruz progressive movement and its predecessor, Berkeley Citizen Action, used to transform our city from a poor, conservative retirement community in the late 1960s to the progressive and economically successful town it is today. Shuman’s book provides an economic blueprint for extending the progressive political work we completed over the past half century. And it is increasingly clear that, without this kind of economic progression, even the impressive political gains we have already made remain at risk.
Local Dollars, Local Sense, rooted in concrete examples, is a must read for those battling to transform local communities into the more humane and livable places that we all desire and deserve.