The role of government: be a local economy activist



I became interested in economic affairs by listening to my father’s speculation about where commercial trucks driving up our street in Eastern France came from. As a German teacher in the local public high school, his own finances were protected from any competitiveness consideration, yet he instinctively understood the power of business in creating local wealth for the community. He also taught at a local textile institute and learned through conversations with his students how tough it was for local plants to compete against rising Asian factories. Although the value system at our household was mostly academic – you were either a “good student” or you were not – he marveled at how a few of his “average” students had become local entrepreneurs and created jobs around our home town. He often quoted the example of a local industrial baker who, while not an A student in his German class, had grown to hire hundreds of local people, eventually providing a strong career to one of his sons-in-law. “My job is to help my students export by teaching them German”, he would say. This was the first public-private partnership of my young economic life.

When I hear how confused we have become about what makes an economy tick, I revert back to my belief in “it’s the local economy, stupid”. By now, we’ve all learned that jobs are created by small businesses, who are by definition local. Economic wealth is generated when a few entrepreneurs find local financing to hire qualified local workers trained at local schools, thereby generating income that can be spent in local shops and invested in local houses, thereby allowing local politicians to be popular and get reelected. The process of co-creation through which these people work with each other – the entrepreneurs, the employees, the bankers, the customers, the service providers, the politicians – is a lot more important than the economic policy set by a central government anywhere. Sadly, this is not how economists think, as they arrogantly keep searching for the next policy paradigm.

So why do we spend so much time devising policies about which we’ll never agree – the role of taxes, regulation, economic stimulation, consumption, or interest rates? Instead of fighting fratricide conceptual battles, let us forget about top-down policies such as reducing taxes and lowering regulation, since they have produced the current financial crisis. Ignore the dogmatic belief in stimulating the economy through spending and investment infrastructure, since this Keynesian prescription has pretty consistently failed in the past. Ignore the battle between austerity and economic stimulation that currently divides the world. All represent a bad framing of the economic challenge in the first place.

The role of government should be to provide the platform through which economic agents engage with each other at the local level. What we need is a process, not a policy answer. These entities are largely disjointed today. I dream of empowered local bankers acting as clearing channels between local savings and local lending and investment, rather than acting as anonymous branches in their global bank’s central policy. I dream of high schools that would be attuned to the needs of local businesses (I wish all high school teachers had been as aware of the local economy as my father was!). I dream of local entrepreneurs sponsoring scholarships for smart local kids and maybe personally setting them as entrepreneurs to be, not as a concession to the inevitable social responsibility requirement, but in the hope of breeding the next generation entrepreneurs and benefitting from their success. I dream of local corporations investing in local services and shops to help them develop by recognizing they are needed to provide a high quality of life locally. I dream of financial products that would help professionals develop their clientele and their clients afford their services. I dream of politicians facilitating the process of bringing together the financial managers of public projects, the local chamber of commerce, local talent, and local associations. I dream of engaging all of these people in the transparent development of their town or city and accepting joint responsibility for the achievements of the local economy.

Some industries are leading the way by becoming local again. Large international grocery stores are co-creating with local farmers because of the local food movement and the demands of sustainability. Even banks are attempting to become more local again to beg for the forgiveness of their sins, trying to reinvent the old-fashioned community banking model of yesteryears. The local trend is there for all to see.

Some of these local government processes exist in embryonic fashion – e.g., town meetings — but by and large, nobody has devised the process of local co-creation that would bring those people together. There are missing interactions everywhere, so local economies lie inertly by the side, waiting to be awakened. Government people have not been trained on how to become local economy facilitators and activists. What is needed is a giant government re-skilling process. We might as well start now.

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3 Responses to “The role of government: be a local economy activist”

  1. Even before the American Revolution, Americans has been voting in their town meetings and colonial assemblies.

  2. Hetty says:

    Wow! Great tihnking! JK

  3. I conceive this website holds some real superb info for everyone. “The foundation of every state is the education of its youth.” by Diogenes.

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