Small can be profitable, too

Author says the cost to consumers to address social and environmental costs could be lower than expected.

Michael Shuman

While locally-grown foods continue to make occasional headlines and banquet menus, a nationally known author and economist encourages Iowa groups to take the next big step: to support locally-owned corporations.

The Leopold Center, Iowa State University's Vision 2020 program and the Wallace Chair for Sustainable Agriculture sponsored a two-day visit to Iowa by Michael Shuman in September. He is author of the 1998 book, Going Local: Creating Self-Reliant Communities in a Global Age (now available in paperback from Routledge), and co-directs the Village Foundation's Institute for Economics Education and Empowerment based in Alexandria, Virginia.

"We are in a peculiar time in American history where business calls the shots," Shuman said. "This can be a barrier to social change, but it also provides an opportunity to get things done."

Shuman shared his recent work with the Chesapeake Bay Foundation to create a community-owned chicken processing business, tentatively called Chesapeake-Friendly Chicken. He estimates that the venture could produce a natural broiler at a 25 percent higher cost than mainstream choices but it could be sold at a 50 percent higher price. The business would operate by the following principles:

• The voting shares of the company will be held exclusively by people living in the Chesapeake Bay watershed.
>li>Stakeholders, including factory workers and growers, will help make decisions by holding seats on the board.
• Higher quality La-Belle Rouge chickens will be grown and processed with air-chilling, both of which improve taste.
• Returns to farmers will be three times those now working under contract with conventional processors, which should pull them above the poverty line.
• The company will maintain high environmental standards (e.g., all manure will be composted and no longer flow untreated into the Chesapeake watershed).
• Labor standards will be improved for line workers through, for example, slowing down the processing lines.
• All of these principles will be locked into place by ensuring that the by-laws cannot be repealed without a 75 percent majority vote.

If the business succeeds, Shuman argues, Chesapeake-Friendly Chicken will show how a business with its stock held by the community can raise social and ecological standards and still be profitable.

"The cost to consumers to address social and environmental costs turns out to be far lower than expected," he said. "For example, environmentally sound disposal of chicken manure is less than a penny a pound retail."

He argued that the business would have an incentive to press state authorities to raise labor and environmental standards for the industry.

One obstacle to creating efforts such as Chesapeake-Friendly Chicken is the lack of capital. Shuman suggested the creation of new venture capital funds that could support community-friendly businesses. Such funds could be capitalized with assistance from state, private, consumer groups and non-profit sources.

In Going Local, Shuman describes dozens of examples of successful small-scale locally-owned businesses. These include credit unions, cooperatives, community land trusts, municipally owned utilities, small worker-owned firms, community development corporations and local shareholder-owned firms such as the Green Bay Packers.

"The only way communities can ensure their economic well-being is to stop chasing multinational firms with no community loyalties, and to start investing in community corporations," he writes. Locally-owned corporations are much more responsive to quality of life issues, workforce concerns and the environment.

He also suggested that self-reliant communities could encourage such community-friendly businesses by issuing a "Good Community Seal of Approval" and by offering more informal education in business leadership.