4 February 2010
Local Stock Exchanges for Sustainability
Posted by Connor under: Economics .
Via Small Mart a very interesting idea: local stock exchanges as a way to stimulate local and regional economies. From an idea featured in the San Francisco Federal Reserve’s Community Development Investment Review.
Since the global financial system unraveled in 2008, U.S. policymakers have struggled heroically to improve the performance and oversight of global banks and investment firms. But these actions have been largely unresponsive to the growing number of Americans who would like to remove their hard-earned retirement savings from these high financial fliers altogether and invest their nest eggs in their community. Might it be time for policymakers to consider the potential stimulus payoffs from nurturing micro-equity investments?
Growing evidence suggests that every dollar spent at a locally owned business generates two to four times more economic benefit—measured in income, wealth, jobs, and tax revenue—than a dollar spent at a globally owned business. That is because locally owned businesses spend much more of their money locally and thereby pump up the so-called economic multiplier. Other studies suggest that local businesses are critical to tourism, walkable communities, entrepreneurship, social equality, civil society, charitable giving, revitalized downtowns, and even political participation.
We have two fundamentally contradictory legal regimes operating today. One, called gambling, allows every adult, irrespective of income, to risk everything for a probable loss. Another, called small-stock investing, prohibits 98 percent of us from investing in the local businesses that are essential for the well-being of community, unless businesses pay prohibitively expensive lawyers’ fees to prepare the unreadable disclosure statements.
Something is deeply wrong here. Outdated federal securities laws have left Main Street dangerously dependent on Wall Street, and overhauling them may well be a key to economic revitalization.