According to this international comparative study of small business policies:

The OECD data demonstrate that: The United States has the second lowest share of self-employed workers (7.2 percent) – only Luxembourg has a lower share (6.1 percent). France (9.0 percent), Sweden (10.6 percent), Germany (12.0 percent) the United Kingdom (13.8 percent), Italy (26.4 percent) and 14
other rich countries all have higher proportions of self-employment.

Not only do we lag in number of self-employed comparitvely but also are far behind in resilience based upon small-business employment:

The United States has among the lowest shares of employment in small businesses in
manufacturing. Only 11.1 percent of the U.S. manufacturing workforce is in enterprises with
fewer than 20 employees. Eighteen other rich countries have a higher share of
manufacturing employment in enterprises of this size, including Germany (13.0 percent),
Sweden (14.4 percent), France (18.0 percent), the United Kingdom (18.1 percent), and Italy
(30.9 percent). Only Ireland (9.6 percent) and Luxembourg (8.5 percent) have a lower share
of manufacturing employment in enterprises with fewer than 20 employees. (Raising the
cutoff for a small business to fewer than 500 employees does not significantly alter the
relative position of the United States.)

U.S. small businesses have a much lower share of employment than the comparison
economies do in the two high-tech fields for which the OECD publishes data: computerrelated
services and research and development.

The United States has the second lowest share of computer-related service employment in
firms with fewer than 100 employees (32.0 percent). . .

Similarly, the United States has the third lowest share of research and development related
employment in firms with fewer than 100 employees

This is not healthy for our economy nor our political institutions. (See here, here, herehere, here) Alabama is 47th in entrepreneurial activity. However, we need a change of mindset within our policy makers:

We know politicians love ribbon-cuttings; the bigger the better.  Politicians also crave the major industry and big plant opening. (Usually, the politician had nothing to do with the creation of the business; they are just stealing credit from the entrepreneur.)  However, real rural development believes “small is beautiful.”  As discussed in this article entitled There is Such a Thing as Rural Development by Larry Lee, “rural Alabama and statewide policymakers must look beyond our traditional manufacturing economy.”

“We need to devote far more energy and resources to helping entrepreneurs get their feet on the ground and to helping small business grow and succeed.  Alabama has known for many years that about 75 percent of all new jobs annually come from industry expansions. But there is nothing sexy when a cabinetmaker hires one or two people. There is not a groundbreaking or photo op for mayors, county commissioners and officials from Montgomery. We must recognize that, by and large, rural Alabama is the land of small businesses.  Census data shows that of the 25,000 businesses in rural communities, 96 percent of them have 49 or fewer employees.

 

1. We know that rural entrepreneurship is the key to economic recovery because thriving entrepreneurship provides the necessary flexibility and agility for rapid response to unexpected upheavals from Wall Street, or Japan, or China. However, Alabama ranks 47th in entrepreneurial activity.

2. We know that rural Alabama is the land of locally-owned, small businesses.

3. We know that long-term job security is dependent upon economic resilience within our local economies.

4. We know that localy-owned, small business growth is the key to rebuilding communities that have been devastated by unemployment.

5. We know that investments in local businesses double the productivity of the investment in out-of-state corporations.

If we believe these things, then why do our policies not match our words. Why do our policy-makers focus almost exclusively on recruiting large, out-of-state industries as the primary plank of economic development policy? Could it be that effective, rural economic development is not good for politicians.

As cited in this article:

Hammett said that since Alabama used the tax break to attract Mercedes, several other states have done the same thing, including Kentucky, Mississippi and Georgia, and Alabama needs to bring back the tax break to remain competitive.

Mike McCain, executive director of the Gadsden-Etowah County Industrial Development Authority, knows the impact of the Kentucky law firsthand. He said Gadsden competed with Mt. Sterling, Ky., for a Chef America frozen foods plant that would employ 900 people, and Kentucky won because it offered the income tax incentives to the maker of Hot Pockets.

If the concern is keeping business in-state, locally-owned business are dramatically less likely to up and leave when a better deal comes along. Those locally-owned businesses are rooted here.

These type of policies only create a race to the bottom. Another state will always be able to play the system and out-bid us through greater tax breaks, more immunity, less restrictions, more grants, and more corporate welfare. At what point do our policy-makers look out for the common good? Can they not see that we are being played.  At some point, we must stop begging to be abused, bullied, exploited.

Instead of just “giving tax breaks to big industry,” we can match our rhetoric with actions by modifying the Governor’s bills. We should dedicate these large investments to locally-owned businesses. Since locally-owned businesses are already rooted in our communities, let’s ease their growth.

  • At least 50% of these incentives should awarded to locally-owned enterprises and entities.
  • Add domestic content requirements which would ensure large percentages (60% perhaps) of the projects’ materials and supplies be produced and manufactured locally.
  • Let’s encourage meeting local needs, locally.  Require additional consideration and preference be giving to projects which will produce items that satisfy local demand and consumption.

These type tweeks generate much greater monetary velocity of each dollar invested than the current proposals and therefore cause greater economic health and resilience.  As I still argue, as here:

We import so much unnecessarily into our local economies. Job security and economic resilience cannot be achieved by focusing exclusively on recruiting big industries to Alabama. A balanced approach should be adopted which encourages the development of home-grown, import-substituting local manufacturers. We must identify the leaks of investment out of our local economies and enact policies which catalyze the local production of many items we now import. Only then can we have some peace of mind concerning a future prosperity.

Long term stability of our local economies and job security will not be achieved by the current models of economic development.

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