The Institute for Local Self-Reliance produced this policy brief for Local Progress, a network of elected officials organized by the Center for Popular Democracy. We’ve reproduced the text of the brief below, and it’s also available to download [PDF] and as part of Local Progress’s library of policy briefs.
Locally owned businesses play a central role in healthy communities, and are among the best engines that cities and towns have for advancing economic opportunity. Small business ownership has been a pathway to the middle class for generations of Americans, and continues to be a crucial tool for building wealth and community self-determination. This is something many people understand intuitively, and it is also borne out by research that finds that the presence of locally owned businesses is linked to higher rates of job creation, less income inequality, and stronger social networks.
Despite these benefits, in many communities, small businesses are disappearing. Between 1997 and 2012, the number of independent retailers fell by about 108,000 and small manufacturers declined by 70,000. Even more alarming than the overall decline in small businesses is the fact that it appears to have become much harder to launch one: The number of new firms created each year has fallen by nearly half since the 1970s, a trend that economists say is slowing job growth.
Contrary to popular perception, this decline isn’t because local businesses aren’t competitive. In many cases, it’s because public policy and concentrated market power are working against them. Misguided zoning policies, soaring real estate costs, and financing terms that incentivize landlords to rent to chains are making it harder for local businesses to find suitable space. Banking consolidation and the decline of local financial institutions has left more entrepreneurs struggling to obtain the capital they need, a barrier that is especially acute for Black, Latinx, and women entrepreneurs. Economic development subsidies and tax incentives further skew the playing field by disproportionately flowing to big corporations.
As policymakers begin to recognize these barriers, some are taking action to ensure that their communities are places where local businesses can thrive. Here is a sampling of the strategies they are using. Continue reading