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Mom and Pop and Skin in the Game

Economic development is an important activity in virtually every political subdivision, from states to cities to bedroom communities. Any new enterprise willing to move in and create jobs is generally—and uncritically—welcomed, and the more jobs, the more welcome. In many states, including mine, economic development officers fall all over themselves to offer incentives for relocation: infrastructure improvements, tax abatements, tax credits—even cash subsidies. Anything to close the sale.

Research suggests we might want to reconsider the wisdom of indiscriminate competition for bigger and more high profile businesses.

A 2006 study by sociologists Stephan Goetz and Anil Rupasingha documented a decline in civic participation, including voter turnout and the number of active nonprofit organizations, after Walmart moves into a community. Those behaviors are markers for social capital, the connections citizens have to each other, characterized by what scholars call “norms of trust and reciprocity.” (The role played by social capital had been studied by others, but it became part of our common vocabulary after its importance was highlighted by Robert Putnam, Harvard political scientist, in Bowling Alone, published in 2001.)

The Goetz and Rupasingha study also showed that with each Walmart store that opens in a city, social capital erodes further.

I was intrigued when I came across this study, so I did a bit more research.

It’s not just that cities and towns with more social capital are better able to foster local enterprises, although they are. According to the research, in places where economic power is diffused, political power is more widely and democratically exercised. As economic power becomes more concentrated, civic engagement slumps.

This research is consistent with an assumption that most economic development professionals hold–a city or town with a widely diversified economic base is healthier than a “factory town” or community that is heavily dependent upon a small number of employers or industries. That belief is grounded in a very practical calculus: in cities where there are many employers, the failure of one business is far less consequential than in cities where a substantial percentage of the workforce depends on one or two large employers.

That logic is persuasive (and pretty self-evident), but it turns out that there is a substantial body of research supporting the thesis that a diversified economy composed of many relatively small enterprises is not only better able to withstand downturns, but also better able to generate higher levels of civic engagement and a higher quality of life.


According to an article in Grist,

In 1946, Walter Goldschmidt, a USDA sociologist, produced a groundbreaking study comparing two farming towns in California that were almost identical in every respect but one: Dinuba’s economy was composed mainly of family farms, while Arvin’s was dominated by large agribusinesses. Goldschmidt found that Dinuba had a richer civic life, with twice the number of community organizations, twice the number of newspapers, and citizens who were much more engaged than those in Arvin. Not surprisingly, Dinuba also had far superior public infrastructure: In both quality and quantity, the town’s schools, parks, sidewalks, paved streets, and garbage services far surpassed those of Arvin.

At about the same time, two other sociologists, C. Wright Mills and Melville J. Ulmer, were undertaking a similar study of several pairs of manufacturing cities in the Midwest. Their research, conducted on behalf of a congressional committee, found that communities comprised primarily of small, locally owned businesses took much better care of themselves. They beat cities dominated by large, absentee-owned firms on more than 30 measures of well-being, including such things as literacy, acreage of public parks, extent of poverty, and the share of residents who belonged to civic organizations.


Residents of communities with highly concentrated economies tend to vote less and are less likely to keep up with local affairs, participate in associations, engage in reform efforts or participate in protest activities at the same levels as their counterparts in economically dispersed environments,” sociologists Troy Blanchard and Todd L. Matthews concluded in a 2006 study published in the journal Social Forces. In studies of both agricultural (2001) and manufacturing (2006) communities, the late Cornell sociologist Thomas Lyson also found that those places with a diversity of small-scale enterprises had higher levels of civic participation and better social outcomes than those controlled by a few outside corporations.


When you think about it, this makes a lot of sense. When I was a young professional, civic leadership in my city was provided by people who did not hold—or want—public office. They had deep roots in the community and believed they had a civic obligation to nurture it. Many were drawn from locally owned banks and industries—enterprises that depended for their viability upon the health of their city. Political actors and elected officials can’t fill these roles. Furthermore, elected officials are less able to be effective without the help of a cadre of civic leaders who are committed to the long-term health of the community and who are not constrained by political considerations. (Long term to a politician, understandably, is ‘until the next election.’)

At some point, we need to consider whether economic development really means snagging that “big box” store headquartered who-knows-where, and ask ourselves whether those cheap tube socks and minimum-wage jobs are really such a bargain.


Author: Sheila Suess Kennedy is a Professor of Law and Public Policy at the School of Public and Environmental Affairs at IUPUI.



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