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By Elissa S. Hillary
Executive Director
Local First

The last couple years have been difficult ones for the people of Michigan. We’ve seen the strongest sectors of our economy falter, lost thousands of jobs, and dealt with all the economic ramifications of these changes—declining public funds, school closures, etc. Individuals and families have had to reinvent themselves, start new careers, and adjust to different standards of living.

This has been a decade of transition—of learning that we need to grow and change. And as painful as these years have been, I firmly believe they’ll result in a better, stronger, more diversified Michigan. As a state, we put most of our eggs in one industry basket and when that industry faltered our economic security deteriorated. This is not a new problem—or a Michigan problem—but something that’s been building for many years:

In 1946, the United States Senate commissioned a study on “Small Business and Civic Welfare.” Senators were concerned by the uneven gains made by big businesses during World War II. In fact, by 1944, “2 percent of the manufacturing concerns in the United States employed 60 percent of the industrial workers.” The Senate worried that such a concentration of economic power might inhibit the long-term health and wellbeing of American communities.

The results of the study were groundbreaking. James Murray, a Montana Senator and Chairman of the Special Committee to Study Problems of American Small Business summarized it best:

“It appears that in the small business cities is found the most favorable environment for the development and growth of civic spirit. A more balanced economic life and greater industrial stability is provided in small business cities. There the employment is more diversified, the home-owning middle class is larger, and the self-employment greater. Public health is better in the small-business communities investigated…public expenditures for such facilities as libraries and education are substantially above such expenditures in big cities. Where big business predominates, slums are more prevalent. The small business cities studied provided for their residents more balanced economic and social life and, on the whole, a higher level of civic welfare than big business cities.”

In other words, the lower the concentration of industrial power, the more vibrant and healthy the study found a community to be. And while we, 60 years later, do not regularly use the terms “small business city” and “big business city,” we have a growing understanding of the importance of diversifying one’s economic base.

I predict that 2011 will be a year of building “small business cities.” Evidence of this change can be witnessed throughout the state. We’re diversifying our manufacturing industry, creating new business incubators and entrepreneurship training programs, increasing our demand for locally-produced goods and services, and moving back into our downtowns. We’re reshaping our economy.

In 2010, a survey by Institute for Local Self-Reliance found that holiday sales at independent businesses were up an average of 2.2 percent. Meanwhile, a U.S. Department of Commerce report showed that overall U.S. retail sales were down an average of 0.3 percent in December 2009 and up just 1.8 percent in November 2009. Most importantly, however, the survey of more than 1,800 independent businesses nationwide determined that “independent retailers in cities with active ‘Buy Local’ or ‘Think Local First’ campaigns reported stronger holiday sales than those in cities without such campaigns.” Over 100 such campaigns have launched within the last decade.

Within the past few months, the City of Grand Rapids has studied the concept of “economic gardening,” an job creation strategy focused on growing the economy by supporting locally owned businesses rather than recruiting businesses from across the globe. In addition, Kent County has spent considerable energy researching the possibility of enacting local purchasing preference. Conversations like these are springing up all over the United States. In 2011, they will no longer be the exception, they will be the norm.

Year after year, the Bureau of Labor Statistics shows that small businesses, those with less than 50 employees, are the largest job creators. In addition, a 2008 study by Civic Economics showed that shifting $1 in $10 currently spent to locally-owned businesses would create 1,600 full-time jobs and $140 million in new economic impact in Kent County.

Why are consumers shifting toward locally-owned businesses? Because the numbers don’t lie.