Book Review: Local Dollars, Local Sense

by John McClaughry ((November, 2013)

“A new book by Michael Shuman explains how federal and state governments prevent us from investing in sound local enterprises, and what people all over the country are doing about it.”


Local Dollars, Local Sense: How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity, by Michael Shuman, Chelsea Green Publishing, 288 p.

The Dow Jones Industrial Average has topped 16,000. Wall Street investors, who were hammered when the mortgage debt implosion drove the DJIA down to 7,608 just four and a half years ago, are exultant.  So is almost everyone who owns exchange-traded investments, 401ks, IRAs, and pension funds.

But quite a few investors are concerned that too much of their financial security (or insecurity) rests on an exchange in a distant financial center, dealing in global corporate securities, and inhabited by people for whom stock exchanges are gambling casinos. These ordinary small scale investors would prefer to invest at least some of their nest eggs in local enterprises run by real local people, in the local economy where they live.

Their opportunities for doing this are severely limited by governments, state and federal. In fact, the federal government that borrowed $787 billion in 2008 to bail out big banks and insurance companies – whether they wanted to be bailed out or not! – has a longstanding policy of stopping you from investing in local enterprises that strengthen your local economy.

How governments do this is brilliantly explained in a new book by Michael Shuman, published in Vermont by Chelsea Green. It’s titled Local Dollars, Local Sense: How to shift your money from Wall Street to Main Street and achieve real prosperity”

It’s significant that Michael Shuman is not a Cato Institute libertarian, but a man of the Left. He’s a lawyer and long-time fellow of the leftist Institute for Policy Studies in Washington. But unlike the common Bernie Sanders socialist, whose answer to every outrage is a full bore government takeover plus coercive redistribution of wealth, Shuman is sharp enough to see that government has become an enormous obstacle to people wanting to make investments to improve their local communities and economies.

Let Shuman speak for himself: “What stands in the way of [a huge shift of capital from Wall Street to Main Street] is obsolete institutions and laws that make local investment extremely difficult and expensive. Securities laws from the Great Depression effectively enacted a system of investment apartheid, with ‘accredited investors’ being able to invest in any business they wish and ‘unaccredited investors’ being essentially told to get lost.”

“Before a business can make an investment ‘offering’ to even a single unaccredited investor, it must pay an attorney to produce a private placement memorandum and various regulatory filings and documents; legal, accounting and government fees could easily run $25,000 to $50,000. If a company wants many unaccredited investors, it must create a public offering that could cost another $50,000 or more, and it must make ongoing, exhaustive filings to the SEC.”

“Besides ensuring full employment for attorneys, securities law can claim one stunning achievement. It has managed to keep small investors away from small businesses. Again, more than 98 percent of the American public cannot invest in more than half of the economy.”

Local Dollars, Local Sense explains clearly, for lay people, how this roadblock can be circumvented. Shuman offers a lengthy menu of imaginative efforts to revive Main Street economies, including cooperatives, credit unions, community development corporations, BIDCOs, microlending, SHARE programs, employee stock ownership plans (ESOPs), community development financial institutions, local mutual funds, local investment exchanges, direct public offers, and internet-based investment accumulation (like Kickstarter). Foreign examples include Fjallbete (Sweden) and Mondragon (Spain).

He also describes several Vermont-based economy-building enterprises, such as the Vermont Sustainable Jobs Fund Flexible Capital Fund, the Burlington Community and Economic Development Office, and the Vermont Community Loan Fund.

One small caveat: There is an important difference between sweeping away foolish government barriers to allow a free people to solve their own problems, and finding a way to capture capital from taxpayers to redirect into government-favored enterprises. Shuman appears to favor both, including the idea of a state bank (as in North Dakota).

Vermont can show some benefits from economic development programs based on funding extracted from taxpayers, or in the case of Federal programs, largely financed by selling Treasury debt. But the really important policy goal ought to be knocking down the archaic government barriers that stifle the creative energies of a free people, who are willing to invest in viable enterprises in their own communities for mutual benefit if only their governments would let them.

Interested? Buy this book, assemble a dozen like-minded people from your community, and get moving.

– Recommended by John McClaughry,  vice president of the Ethan Allen Institute 


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The Ethan Allen Institute is Vermont’s free-market public policy research and education organization. Founded in 1993, we are one of fifty-plus similar but independent state-level, public policy organizations around the country which exchange ideas and information through the State Policy Network.

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