TO THE EDITOR
BY MICHAEL H. SHUMAN
Go Local & Prosper
Examining true indicators of
success and failure.
R
ecent arguments in Lane County about the value of
using tax abatements for business promotion have
overlooked a key question: Even if the incentives
work, on what kinds of businesses should they be focused? A
growing body of evidence suggests that county officials, long
infatuated with attracting big outside businesses, should instead
focus inward.
Much has been made of the recent report of two UO undergrads who esti-
mated that the $49 million tax break to Hynix Semiconductor, even though it produced fewer
jobs than promised, generated some $225 million in local economic benefits. But they asked the
wrong question. Simply dropping $49 million in dollar bills from a helicopter over downtown
Eugene, like any economic stimulus, would probably produce similarly impressive benefits.
The real question is what kinds of businesses will produce the most benefits per dollar of
public investment, and here the data are unequivocal against outside recruitment. A recent
study in Austin, Texas, found that for every $100 spent at a nonlocal Borders bookstore, $13 is
recirculated into the local economy. For every $100 spent at a local bookstore, $45 was re-spent
locally — nearly triple the economic impact, and roughly triple the tax benefits for the public
sector.
These findings are not unusual. Studies in places as different as Cape Cod and the U.K. have
come to the same conclusion. And the reasons are easy to understand. Local businesses are
more likely to hire local residents, more likely to pay higher wages, more likely to buy local in-
puts, more likely to spend advertising dollars locally, and more likely to be good community citi-
zens.
When I debated these issues last month with Jack Roberts, head of the Lane Metro
Partnership (www.lanemetro.com), I asked him to cite a single study, any evidence whatsoever,
that nonlocal business performed as well for an economy as a locally owned business. He could
not.
In fact, his record in Lane County underscores the relatively poor performance of outside
business. A recent series of articles last August in The Register-Guard analyzing enterprise
zones found that a given dollar amount of tax abatement for local business produced 15 times
more jobs than the same tax abatement for nonlocal business. And that doesn’t even include
the higher multiplier and tax impacts of local business.
Put another way, had the $49 million tax break given to Hynix instead gone to locally owned
business, the regional benefit might have been not $225 million, but well over $1 billion.
You may say it’s just a film, and different
than the books anyway. But what saddens me
the most is how few people can recognize it
for what it is. All the chaotic violence, inter-
nal squabbling, and negative energy is por-
trayed as “noble and good,” even though it is
only a lesser shade of the darkness repre-
sented by the demons and orcs. We have be-
come lost as a society when this decay is so
omnipresent that few people anymore can
discern a meaningful difference between
good and evil. We can’t look to traditional au-
thority figures to teach us, because they have
shown they are just as clueless. In a nutshell,
are we doomed to destroy ourselves?
David A. Caruso
Eugene
STINKING SHIP
Hmmm, three straight days of front page
headlines about mad cow. You’ve got to
admit, it’s more than a little ironic that the so-
called “animal rights wackos” that Rush and
his ilk love to deride, could have saved the
meat “industry” all the financial hardship that
is crashing down around them now. You see,
the “wackos” have been trying for years to
end Big Meat’s brutal practice of dragging or
bulldozing downers (animals too sick or in-
jured to stand) across asphalt so they can be
slaughtered for profit, rather than allowing
them to be euthanized humanely. No go —
thanks to soulless meat industry lobbyists and
their prey — weak-kneed legislators.
Now Big Meat’s apologists, and the Bush
administration’s pathetic USDA, are scram-
bling to tell us that contrary to popular belief,
R
oberts defends his outside recruitments, even those that went sour such as Sony, by say-
ing that the companies were unlucky victims of fluctuations in the business cycle over the
past year. But shutdowns during the inevitable ups and downs of business are an inherent
problem of nonlocal business. Businesses not rooted to place are always searching for the highest rate
of return, which means they will be quick to close or move a factory when things gets tough.
A local business, in contrast, usually only wants a positive rate of return, and its threshold for quit-
ting the community is much higher. This explains why, over a generation, big companies come and go
but home-grown ones usually stick around.
The only coherent reason Roberts gives for preferring nonlocal business is that they pay higher
wages. And it’s true that if one takes a momentary snapshot of U.S. business, large firms pay slightly
more than small ones. But it’s becoming less true as Wal-Marts and other nonlocal box stores fine-
tune a business model based on part-time, minimum-wage, no-benefits work. Moreover, studies by the
U.S. Small Business Administration have shown that over several years as small firms succeed and
grow the wage differentials disappear entirely.
Its unfair, of course, to lay these mistakes on Jack Roberts. He’s just following the old industrial
snake oil brewed by a generation of globalization-minded economic planners. Foolishness in Oregon’s
economic development is a thoroughly bipartisan affair. Even Gov. Kulongoski, a Democrat, brags
about his record of bringing new businesses to the state — a record that, given the relative neglect of
homegrown businesses, is actually an indicator of failure. Every time he beams about attracting wind-
power manufacturers from out of state, someone needs to remind him that Oregonians are perfectly
well equipped to start these businesses themselves.
Michael H. Shuman is the director of Community Ventures in Washington, D.C., and author of Going Local: Creating
Self-Reliant Communities in a Global Age.
So they finally captured Saddam Hussein
— defeated, unkempt, and hiding in a hole —
hardly a threat to the world. Yet now since he
is captured, we are heroes, the Iraq war was
justified, and a good thing. The media even
quotes Shakespeare, saying: “All’s well that
ends well.” Whatever.
So how obvious does it have to get?
Within hours of his capture the “liberal”
media spins this event to strengthen George
Jr.’s re-selection campaign.
Never mind that Hussein’s secular regime
had nothing to do with Al Qaeda, Osama Bin
Laden, or Sept. 11, 2001. Never mind that
Iraq’s weapons of mass destruction were de-
stroyed in the 1990’s, their destruction
proven, and that the U.S. provided them in
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B
oth Lane County and the state of Oregon need to refocus their business support o n locally
owned firms. Not a single dollar of subsidy whether for tax abatements, bond issues,
loans, loan guarantees, or capital improvements should go to a nonlocal business.
Dump the recruitment game altogether. This doesn’t mean that outside firms should be discour-
aged from coming to Oregon. To the contrary, welcome them, throw them parades but just stop
paying their way to the detriment of the hometown players.
Meanwhile, scarce public dollars should be used to help local entrepreneurs with technical
assistance, market studies, and new sources of capital. A recent study from the UO highlighted,
for example, that the sustainability sector in Lane County produces more than $60 million for
the local economy. With proper government support, this sector — including green building, nat-
ural foods growing and processing, eco-industries, biofuels and biochemicals, solar energy pro-
duction, and waste recycling — could be the prime source of future business and job growth.
As an ancient Chinese philosopher once said, no matter how far down the wrong path you
have gone, turn back!
we don’t reap what we sow — everything is
just fine. Think Big Meat’s pig and poultry
operations are any more sanely or humanely
operated? One look at The Humane Farming
Association’s website (www.hfa.org), and
you’ll realize were not in Dorothy’s Kansas
anymore.
The good news it that you can walk away
from Big Meat’s stinking, sinking ship. Not
only can we choose from an amazing array of
great non-meat, high protein products that
taste good. For a buck or two more, we can
buy organic and free-range meat, poultry, and
dairy products. As always, we Americans
have a choice, one of which we alone are ac-
countable for.
Robert Hermann
Eugene
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