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Helena Norberg-Hodge is happy
The annual international Economics of Happiness conference brought experts from a dozen countries to Byron Bay earlier this month to discuss ways to curb the social and economic challenges created by globalisation. Investing in local business is key.
Conference convener and head of the International Society for Ecology and Culture, Helena Norberg-Hodge, last year won the Goi Peace Award for her pioneering work in the new economy movement.
“The economic system of globalisation is [taking] people far away from each other,” Norberg-Hodge says. “There is a disconnection from community and from nature, which is contributing to the global epidemics of depression and pollution,” she says.
“This is happening because the economic system has become so big we don’t see the contours of it. It has scale combined with speed and our arms have become so long we can’t see what our hands are doing.”
Investing in local business was one of the solutions posed at the forum to not only reinvigorate communities but also bring greater wealth and prosperity away from multinational corporations and back to local communities. American economist Michael Shuman, director of research at the Business Alliance for Local Living Economies, says local investment – which he describes as shifting money from Wall Street to Main Street – brings multiple benefits.
“If you invest locally, you not only get the advantage of supporting local business, but you get the benefits of the local multiplier: propping up jobs and wealth and tax in the local community, which you would not have in outside investment. You also get the benefit of investors being converted into consumers, so they become more loyal and are a great marketing force,” says Shuman, whose work was instrumental in getting the JOBS Act passed in the US in April last year, which eased restrictions on local investment.
Shuman says the Australian superannuation system provides a ripe example of how investment money could be channeled from global companies to local business. He says two-thirds of the Australian economy is made up of businesses with less than 200 staff, however only a small slice of superannuation savings are invested in this type of business. Shuman says if two-thirds of superannuation money was invested in small business that would average out to $50,000 per person that would invested into the local economy.
“Take the population of your town, multiply that by $50,000 and that is the amount of money that would flow into your community if we get the system right,” Shuman says.
Shuman says while there are inherent risks investing locally, such as the smaller pool of investment options, and issues of geographic concentration, this is balanced by the reduced risk of dealing with known, local parties, as opposed to the arm’s length transactions of global investments.
“You have the ability to ground your investing, meet the entrepreneurs, talk with the workforce, check out the books, buy the goods. Community banks which use personal relationships for testing the reliability of the loan have a far better track record than local banks with credit checks, because relationships matter to us.”
Some of the exciting developments that have made it easier to invest in local businesses, Shuman says, are self-managed superannuation funds, that give more flexibility in the options for investing, and sponsorship sites, such as Kickstarer, that allow multiple people to donate or invest small sums of money into a project or business.
What Shuman would like to see more of is managed funds specifically created to invest locally. In lieu of this, he recommends individuals pool their cash and approach an accountant to make local investments on behalf of the group.
Shuman says it might be some time before there are thriving investment markets that enable the buying and selling of assets in the local economy.
“The law has shaped practice and practice has shaped how we train people to do the practice, such as in the business schools. It’s going to take a while to change the practices of the people in the investment community – people need to see models of success, and in the US we have a couple of new types of business schools that concentrate on social enterprise,” Shuman says.
“I believe we are on the precipice of a huge investment revolution. What will happen when the first trillion dollars moves from Wall Street to Main Street? As demand for local securities goes up, their prices will get better, and the prices will go down on Wall street,” he says.
“So the next trillion moves, and another and another. This could happen very quickly. This could be the most significant shift of capital in human history.“