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NMAG 2.ppt


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NMAG 2.ppt

  1. 1. New Mexico First How Community Capitalism Can Revitalize the State Economy
  2. 3. Introduction <ul><li>TINA </li></ul><ul><li>vs. </li></ul><ul><li>LOIS </li></ul>
  3. 4. TINA–There Is No Alternative <ul><li>Get Toyota </li></ul><ul><li>Prioritize Export-led Development </li></ul>
  4. 5. LOIS– The Alternative <ul><li>LO: </li></ul><ul><li>Local Ownership </li></ul><ul><li>IS: </li></ul><ul><li>Import-Substituting Development </li></ul>
  5. 6. Overview <ul><li>LOIS Is Better Than TINA </li></ul><ul><li>LOIS Opportunities in New Mexico </li></ul><ul><li>A Key Challenge: Financing LOIS </li></ul>
  6. 7. Challenges for Sustainable Community Development <ul><li>What’s Being Produced? </li></ul><ul><li>How? </li></ul><ul><li>Who Owns? </li></ul>
  7. 8. The Costs of Going Global <ul><li>$$$ to Lure Firms </li></ul><ul><li>$$$ to Keep Firms </li></ul><ul><li>Falling Standards </li></ul>
  8. 9. Advantages of Local Ownership <ul><li>High Standards </li></ul><ul><li>No Destructive Exits </li></ul><ul><li>Long-Term Wealth </li></ul><ul><li>Flexible RoR </li></ul>
  9. 10. Examples of Local Ownership Ben & Jerry’s (Early) Community Held Burlington Telecomm Public-Private Partners 2,500 50+% ESOPs Worker Owned 6,300 Examples Municipally Owned 47,000 Success Stories Cooperatives 6.5% GDP Nonprofits 50% U.S. Economy Small Business
  10. 11. Community Stock Ownership <ul><li>Green Bay Packers </li></ul><ul><li>Hybrid Nonprofit </li></ul><ul><li>$25 Voting Shares </li></ul><ul><li>60% Local </li></ul><ul><li>Poison Pill </li></ul>
  11. 12. IS - Import-Substitution (Community Self-Reliance) <ul><li>What are the risks of dependence? </li></ul><ul><li>Why favor IS-development? </li></ul>
  12. 13. Risks of Import Dependency <ul><li>More Vulnerable </li></ul><ul><li>Lower Multiplier </li></ul><ul><li>Lower Tax Receipts </li></ul>
  13. 14. Healthy Economic Multiplier UNM Students UNM Purchasers NM Farmers NM State Government
  14. 15. Weak Economic Multiplier UNM Students UNM Purchasers NY Farmers NY State
  15. 16. The Perils of Chains
  16. 17. Advantages of IS-Development <ul><li>Minimize Vulnerabilities </li></ul><ul><li>Maximize </li></ul><ul><li>Multiplier </li></ul><ul><li>Maximize Tax Receipts </li></ul>
  17. 18. Self Reliance Is Not Autarky Local Electricity Demand Wind Machines Windmill Manufacturing Import Import Import Outside Utilities Outside Windmill Manufacturers Outside Parts Manufacturers North Dakota Rest Of World
  18. 19. Community Scale Economies Recycling Anaconda Materials Flexible Networks Multinationals Manufacturing KW Wind/Solar GW Nuclear Energy $100 M Assets CitiCorp Banking New Economy Old Economy
  19. 20. Why LOIS Is Competitive <ul><li>Inefficiencies of Global Distribution </li></ul><ul><li>Energy Cost Escalation </li></ul><ul><li>Environmentalism </li></ul><ul><li>Niche Marketing </li></ul><ul><li>Personalized Services </li></ul><ul><li>Brains, Not Brawn </li></ul><ul><li>Shrinking Subsidies </li></ul><ul><li>Localist Preferences </li></ul><ul><li>Humane Workplaces </li></ul><ul><li>Terrorist Resistant </li></ul>
  20. 21. Inefficiency of TINA Distribution <ul><li>Food Systems </li></ul><ul><li>Telecommun’s </li></ul><ul><li>Electric Utilities </li></ul>
  21. 22. Services Are Mostly LOIS <ul><li>Industrialized Trends </li></ul><ul><li>Internet Trends </li></ul><ul><li>“ A steadily rising share of the work force produces services that are sold only within that same metropolitan area….And that’s why most people in Los Angeles produce services for local consumption, and therefore do pretty much the same things as most people in metropolitan New York – or for that matter in London, Paris and modern Chicago.” </li></ul><ul><li>- Paul Krugman, </li></ul><ul><li> Pop Internationalism </li></ul>
  22. 23. LOIS = Homeland Security <ul><li>“ Even before terrorists leveled the World Trade Center, economic and technological forces were combining to decentralize the economy. Sept. 11 will only reinforce these centrifugal forces…” </li></ul><ul><li>Wall Street Journal, p. 1 </li></ul><ul><li>October 25, 2001 </li></ul>
  23. 24. II. LOIS Opportunities for NM <ul><li>In which sectors does New Mexico produce relatively more than a typical U.S. state? </li></ul>
  24. 25. (1) Food & Fiber <ul><li>Trendy Clothing </li></ul><ul><li>High-Value Livestock </li></ul><ul><li>High-Value Crops </li></ul>
  25. 26. (2) Forestry <ul><li>Reforestation </li></ul><ul><li>Paper Industries </li></ul><ul><li>Wood Industries </li></ul>
  26. 27. (3) Biofuels & Biochemicals <ul><li>Petrochemical Success Is Unsustainable </li></ul><ul><li>Carbohydrate Economy </li></ul>
  27. 28. Oil Price Trends
  28. 29. (4) Renewable Energy <ul><li>Electricity & Gas Success Is Unsustainable </li></ul><ul><li>Solar & Wind </li></ul>
  29. 30. (5) Water Conservation
  30. 31. (6) Relocalize Retail
  31. 32. (7) Services <ul><li>Easily Filled Gaps </li></ul>
  32. 33. (8) Home-Based Businesses <ul><li>Integrate with Family & Community Life </li></ul><ul><li>New Industrial Parks </li></ul><ul><li>Zoning Reform </li></ul>The Going Local Staff
  33. 34. (9) Manufacturing <ul><li>Hollow State </li></ul><ul><li>Small-Scale Opportunities </li></ul>
  34. 35. Flexible Manufacturing Networks <ul><li>90,000 N. Italy Manufacturing Companies </li></ul><ul><li>97% Have Under 50 Employees </li></ul>
  35. 36. (10) Finance, Insurance, Real Estate (FIRE)
  36. 37. III. A Key Challenge: Financing LOIS
  37. 38. Finance Potential for LOIS
  38. 39. Localness of Financial Assets
  39. 40. NM-PERA Investments
  40. 41. Traditional Economic Development Strategy <ul><li>Small Business Dev. </li></ul><ul><li>- Entrepreneurship TA </li></ul><ul><li>- $$$ Assistance </li></ul><ul><li>Banking Access </li></ul><ul><li>- Community Banks </li></ul><ul><li>- CRA </li></ul>$ $
  41. 42. A New Economic Development Strategy Small Business
  42. 43. Breaking the LOIS Monopoly TINA Stocks Qualified Investors Hedge Funds Grassroots Investors Mutual Funds Pension Funds Venture Funds LOIS Stocks (27-J) LOIS Stock Creators
  43. 44. Challenges to Localizing Stocks? <ul><li>Low Entrepreneur </li></ul><ul><li>Awareness of 27-J </li></ul><ul><li>Low Interest by </li></ul><ul><li>Underwriters & BD’s </li></ul><ul><li>Disorganized Local- </li></ul><ul><li>Minded Investors </li></ul>
  44. 45. Challenges to Localizing Mutual Funds? <ul><li>Bias Against </li></ul><ul><li>Localization </li></ul><ul><li>Absence of </li></ul><ul><li>Investment </li></ul><ul><li>Opportunities </li></ul><ul><li>Arguments FOR Local Investment </li></ul><ul><li>1. Verify Risk </li></ul><ul><li>2. Local Investors </li></ul><ul><li> As Consumers </li></ul><ul><li>3. Multipliers As </li></ul><ul><li> Risk Hedge </li></ul><ul><li>4. Synergies </li></ul>
  45. 46. Challenges to Localizing Pensions <ul><li>Absence of Local </li></ul><ul><li>Mutual Funds </li></ul><ul><li>Absence of State </li></ul><ul><li>Innovation </li></ul><ul><li>ERISA Provisions </li></ul>
  46. 47. What Can Private Innovators Do? <ul><li>27-J Creators </li></ul><ul><li>27-J Underwriters & Broker-Dealers </li></ul><ul><li>27-J Hedge Fund & Venture Fund </li></ul>
  47. 48. Gulliver Venture Fund – Santa Fe, New Mexico Local DPO Global IPO Exit Strategy <50% >50% VC Ownership Mature Buz Start Up Stage Ma & Pa High Tech Type Buz. 2 x > 5-10 x 5-Year Growth Gulliver Fund Typical VC
  48. 49. What Can State Government Do? <ul><li>(1) Refocus Subsidies </li></ul><ul><li>(2) NM Stock Market </li></ul><ul><li>(3) BIDCO Legislation </li></ul><ul><li>(4) Tax Credit for </li></ul><ul><li>Local Pensions </li></ul><ul><li>(5) Reinvest Public </li></ul><ul><li>Funds Locally </li></ul>
  49. 50. State Investment Council
  50. 51. What Can Philanthropy Do? Research and advocacy to reorient subsidies, taxes, zoning, and wage policies to support local business. Policy “ New Mexico First” campaigns through local directories, B-C credit cards, B-B marketplaces, B-G purchasing. Purchasing Development local banks, mutual funds, retirement accounts, VCs, and selective G investment. Plus PRIs. Investing Incubators, training centers, mentorship programs. Training Studies of indicators, assets, and leakages. Planning
  51. 52. The 21 st Century’s Choice
  52. 53. For More Information: <ul><li>Michael Shuman </li></ul><ul><li>202-364-4051 </li></ul><ul><li>[email_address] </li></ul>