The $80 Billion Shift We Need Now for Economic Democracy

By Michelle Long, Executive Director, BALLE

This guest post appears on the Dollars & Sense blog as part of New Economy Week: From Austerity to Prosperity, a week of online and in-person events being convened by the New Economy Coalition from November 9-15

Not long ago I sat with a colleague and technical assistance provider to small businesses in a major southern city. As she told hNEC-Long-post-imageer story, she broke down in tears of frustration and grief. She had been working against the clock to help a committed group of small black-owned plumbing businesses meet all contractual requirements so they could bid to serve the city’s new airport and nearby hotels. African-American owned businesses are the number one employer of black workers nationally, and securing these contracts would have grown these businesses and enabled the owners to hire more workers in a city where more than 50% of black men are unemployed. The city had been touting their commitment to these small businesses, yet, on the eve of the announcement, someone in power decided to award the entire contract to one company that included no locals and was owned by an old Ivy League business school classmate.

This exact same scenario plays out in towns across our nation. All too often, community tax dollars benefit the few at the great expense of the many. Our economic development decisions are maintaining a system of inequality.

In a new economyhow would economic development create real community prosperity?

Dozens of studies presented in publications that range from Harvard Business Review to Economic Development Quarterly to Federal Reserve studies now show us that incomes rise faster in places with more small businesses than in those dominated by big businesses, that counties with the highest density of local and small businesses do the best job of reducing poverty, and that economies of small-scale businesses have greater community well-being, including lower rates of crime and better public health. Further, according to the SBA, from 2004 to 2010 U.S. micro-businesses created a net of 5.5 million jobs while large businesses over 500 employees lost 1.8 million jobs. Very small businesses—as in under 20 employees—created all the net new jobs in this country.

Today the literature is clear—an economy with a small number of big players does a good job of funneling wealth into few hands, but the more local and diverse business ownership is will create the most jobs and the most wealth for the most people. Economic development is defined as “policy interventions with the aim of economic and social well-being of people” and should therefore strengthen local and community ownership. Unfortunately, less than a quarter of local governments are currently pursuing local and community-owned business development activities.

Instead, state and local governments have dramatically increased their use of “retention and recruitment” incentives—from 56 percent using them in 2004, to close to 90 percent by 2009. Mainstream economic development chases Boeing, or Marriott, or Dell with tens of millions of dollars from town to town. Local governments may pay the equivalent of $200k per job only to have the company lay everyone off and move away after a few years.

In fact a new study from Good Jobs First shows how economic development incentives simply help the “corporate rich get richer.”  Top recipients include companies like Shell Oil, Dow Chemical, Amazon, Volkswagen, and Wal-Mart. To top it off, less than one third of the dollars gifted to these companies are tracked. We only know from investigative watchdogs how common it is for millions of dollars to be awarded to companies that never hire any additional people. Some actually eliminate jobs. The nonprofit group Institute for Local Self Reliance ( notes that, “by privileging large firms, these programs award taxpayers’ dollars where they’re least needed, and put another way, make it so that small businesses have to watch a portion of their tax dollars go to subsidize their biggest competitors.”

These incentive dollars come from us—we the people—and they are being used to drive inequality to levels not seen since 1928. We are funneling our own money into the private hands of the few.

I think it needs said clearly if we want more equal societies then local governments should not subsidize, provide tax breaks, or in any way provide concessions and support for large corporations with centralized ownership. It results in neither economic nor community development. It is simple wealth extraction and harm.

The Opportunity Ahead

“I did then what I knew how to do. Now that I know better, I do better.”         –Maya Angelou

Shifting up to $80 billion (the money spent annually on economic development incentives) presents a massive, ready-made opportunity. Doing better would mean new eligibility rules for community economic development incentives. A community’s dollars should be used to support its own people, with particular focus on the areas with the greatest need. If we want the majority of people to receive the maximum return on their community’s investment then small businesses must be strengthened at every turn. Minority and women ownership should be prioritized to level the playing field. Bigger businesses should be supported in their efforts to transition to employee ownership.

Here are five ways to start the shift tomorrow:

  1. Use incentive dollars to instead back local business hubs and networks that are focused on place, health, and equity. These systems of support for locally owned businesses nurture local supply chains, enable peers to support each other, and foster the kind of collaboration necessary to make local food distribution viable or renewable energy locally affordable.
  1. Re-direct corporate subsidies to organizations that provide technical assistance to micro enterprises. Groups like Rising Tide Capital are adept at strengthening these businesses to create jobs, and they generate nearly $4 in economic impact for every $1 invested. The Association for Enterprise Opportunity has shown that if just one in three microenterprises was strengthened to hire a single employee, the United States would be at full employment.
  1. Invest in shared infrastructure for local “economies of scale.” For example, a foundation in Maine invested in a local grain mill, providing needed processing that made the resurgence of regional grain farmers viable.
  1. Purchase land for the community. Agricultural and community land trusts preserve affordability for residents, farmers, and local business owners in contrast to speculative gentrification. Land banks to bring vacant and blighted lots under the control of a public authority to redevelop the land for productive uses.
  1. Support the creation of worker-owned businesses, and support larger businesses, particularly those going through founder transitions, to become employee owned through ESOPs. Businesses from Dansko to Eileen Fisher to New Belgium Brewery have traveled this path in recent years. Said New Belgium CEO Kim Jordan, “One of the things that we think is a big societal issue is this widening gap between the haves and the have-nots. And we realized that we had an opportunity to support people owning something that was increasing in value. Shared equity has been an incredibly powerful engine for us.”

Former Mayor of Kansas City, MO, and current publisher of Governing Magazine Mark Funkhouser says, “For several decades we have been conducting an economic-policy experiment in state and local governments, and now it’s time to stop the testing because the results are clear: the dominant paradigm, incentive-fueled competition among these governments, does not create economic prosperity.” Instead he argues that now is the time for “testing and developing a new paradigm for economic development, one that channels capitalism’s strengths while protecting the commons and producing a more broadly shared version of prosperity.”


We know better—let’s do better.

This piece appears as part of New Economy Week 2015: From Austerity to Prosperity, a week of online and in-person events being convened by the New Economy Coalition, Nov. 9-15

Michelle-LongMichelle Long is the founding Executive Director of BALLE: Be a Localist, a growing network of 100,000+ community entrepreneurs and funders. Founded in 2001, BALLE’s vision is to create, within a generation, a network of interconnected local economies that work in harmony with nature, to support a healthy, prosperous and joyful life for all people.

Why Free Higher Ed Can’t Wait

By Biola Jeje and Belinda Rodriguez

This guest post appears on the Dollars & Sense blog as part of New Economy Week: From Austerity to Prosperity, a week of online and in-person events being convened by the New Economy Coalition from November 9-15

Vermont Senator and Democratic presidential hopeful Bernie Sanders has come out in support of free public higher education as part of his campaign platform. Sanders’ plan calls for the elimination of tuition at four-year public colleges and universities. This would be paid for through the implementation of a financial transaction tax, which is a tax of half a percent on Wall Street transactions and could raise close to $300 billion a year.

Sanders is not alone. For years, students and advocates have been pushing for free higher education, citing many other countries where this has been the case for decades. Free education could help us solve some of today’s key economic issues; primarily, the fact that the bar is higher for most employment, with most jobs requiring a college degree. The economy is shifting, and student debt in the United States has reached a historic total of over $1.3 trillion. The average individual debt has now grown to $35k, while wages struggle to grow with inflation. The United States is clearly in need of a deep restructuring in terms of how workers are prepared to enter the labor market.

Free (totally free) higher education is key to solving not only the issue of student debt in this country, but also to respond to the demands of our changing economy and mounting challenges ahead. (By “free” we mean four years of tuition-free public higher education, while expanding financial aid to cover other costs associated with attendance (food, housing, books, etc.).)

Most jobs now require a college degree but that has not always been the case. For most of our country’s history there has been a substantial amount of well-paid, low-skill work available to people with high school diplomas. Advances in technology have reduced the demand for farming labor, manufacturing labor and routine clerical work, with demand rising for professional and managerial roles that require specialized training. Outsourcing of low-skilled labor has also contributed to this shift. These changes have been taking place steadily over the past few decades, culminating in a more abrupt shift in recent years. In 1990, the manufacturing industry was the leading employer in 37 U.S. states. By 2013, that number dropped to just seven states, with health care and social services providing the most jobs in 34 states.  Of over one million job openings in the U.S. in 215, more than 900,000 were in healthcare and education services.

Economic disparities play a huge role in determining who has access to a college education, and therefore who can compete in our changing economy. Low income students and students of color are less likely to be able to afford the rising costs of higher education, and are getting shut out of opportunities. Enrollment rates are dropping (according to a recent Wall Street Journal article, “The number of students at U.S. colleges and universities fell nearly 2% between May 2014 and this month”), drop-out rates are increasing, and it is taking students longer and longer to complete their degrees due to financial obstacles.

Students who do manage to attend college increasingly rely on loans to finance their education, with students of color taking on a disproportionate debt burden. At public institutions, 63% of white students borrowed to pay for their education compared to 81% of black students. At private institutions, black and Latino students borrow at higher rates than white students, with Latino students taking on the highest average debt. (Your authors each fall into one of these categories.) Higher levels of debt are also impacting students in the long term. Indebted students are less satisfied with their careers, are saving less for retirement, and are less likely to own homes.

Debt is even shaping the jobs students pursue after they graduate. Indebted students are more likely to pursue stable, high-salary positions than low-paid public interest work due to pressure to pay their loans. This finding should be concerning to all of us, considering the enormous collective challenges U.S. Americans face in the years ahead. If we are going to address the deep-rooted crises of racial injustice, climate change, and other sources of social instability, we need to create incentives for students to pursue meaningful work they are passionate about, instead of making it harder and harder for them to do so.

It is particularly concerning that our debt-based system of higher education is depriving people most affected by the flaws in our current political and economic systems of opportunities to participate in reshaping them. People of color, working class people, survivors of sexual violence, undocumented people, women, and LGBTQIA people deserve to take the lead in crafting solutions to issues that affect their communities. Higher education plays a crucial role in providing access to tools and resources to make this possible, yet individuals from each of these groups face pervasive economic barriers to pursuing a degree and graduating.

Art Motta, a student at UC Santa Cruz who studies Politics and Latin American & Latino Studies, acknowledges that his education has helped him gain the capacity to “analyze institutionalized structures [and] power dynamics,” skills critical to help him pursue his passion for advocacy and public service. “[My education] also supplies me with a wealth of background knowledge for real situations that I am bound to encounter as a student of color in a system that was not made for me.”

Art represents one of many non-traditional students who had to delay pursuing a college education due to financial barriers. “I had to put my education on hold because the costs became unbearable…I had to focus on providing for my family.” Art was ultimately able to resume his studies but he is very conscious of the fact that these opportunities are not available to most of the people he grew up with. “In my community, graduating from high school was considered a major feat in itself,” Art said. Pursuing a four year degree remains further out of reach “because of the high costs associated with college.”

The layers upon layers of ways in which our debt-based system of higher education drives inequality are shocking and immoral. But what would things look like if higher education was free? We asked student organizers with the United States Student Association to consider how free higher education would impact their lives and their communities.

Yareli Castro, an undocumented student organizer at UC Irvine, noted that just 1% of undocumented students currently in college ends up graduating. “One of the main reasons why my community does not go to college or if they do, they drop out, is [because of] financial circumstances. In many states, undocumented students do not get financial aid, loans, or any type of financial support and the burden is very heavy. Undocumented students are very often not allowed to work in this country, so this financial pressure continues mounting. Free higher education would allow my community…to not have to worry about working many jobs [or] taking out loans, and solely work on their studies.”

Filipe de Carvalho, a student organizer at UMass Amherst, reflected on the role free higher education could play in giving students opportunities they can believe in. If higher education was free, “a much larger percentage of my high school … would see a four-year university as a real option. I believe many of my peers would have cared more about their academics in high school had they believed that they could actually go to college.”

Jordan Howzell, a student organizer at UC Santa Cruz, expressed that free higher education would allow her to “pursue a career rooted in my passions instead of its ability to cover my student loans.” If higher education was free, she would study “music and its psychiatric and rehabilitative qualities and how music is situated in social movements and social justice issues.” Several of the students interviewed expressed similar sentiments in reference to choosing their major. Some said they would opt for completely different majors, while others said they would add concentrations in the humanities to build a balanced worldview and skillset.

John Ashton, a student organizer at Des Moines Area Community College, said, “When education is expensive only the rich can obtain it. When education is free, the disenfranchised can become the best and brightest and after all is said and done that is what America is all about….Until the cost of higher education is eliminated, [our] higher education system [will never] achieve its full potential, nor will it train enough of the next generation of workers to meet the needs of the country.”

If we want to end economic inequality and build a better future, we need higher education to be free. Free higher education will not solve all of our problems, but it is big step in the right direction. If young people have access to debt-free high-quality education, it will open up more opportunities for them to use their skills and strengths to build satisfying careers and serve their communities, instead of cramming themselves into thankless and soulless positions just to make ends meet.

This will inevitably take time. Students have been pushing for free higher education for years, and it has only now become a part of the mainstream lexicon. Since President Obama announced his free community college plan earlier this year, several elected officials have introduced plans for tuition-free and debt-free college. It is important that we closely examine these proposals as they come out, and fight to make sure they include all groups affected by the issue. It is even more important that we build enough power to secure the win and craft our own narratives about why free higher education matters.

At the last Democratic presidential debate, Bernie Sanders offered an accurate assessment of what it will take to make free higher education a reality. “If we want free tuition at public colleges and universities,” Sanders said, “millions of young people are going to have to demand it.”

This is exactly what is starting to happen across the country. In recent months, we have witnessed an inspiring upsurge in mobilization around the demand in the lead up to the Million Student March. On November 12, students are rising up to demand free higher education, forgiveness of all student debt, and a $15 minimum wage for all campus workers. The March marks the beginning of an exciting political moment, with over 100 actions planned and support from major progressive organizations and labor unions. But it is just the beginning. Young people fighting for progressive change have learned important lessons about what it takes to win over the past few years. There is a widespread understanding that we need to consistently mobilize a large base of young people and win overwhelming public support to make free higher education a reality.

Biola Jeje is a cofounder of New York Students Rising, a statewide student network of state and city colleges, and now works as a full time digital media organizer in the labor movement. Belinda Rodriguez is the Trainings Director at United States Student Association, a nationwide organization that works at multiple levels of grassroots organizing and legislative engagement to address issues that deeply affect students.