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DIY Economy: Americans Take the Lead as Washington Stalls

America still wallows in what feels like a recession. Although corporate profits have recovered, job growth remains slow, unemployment high, and median incomes stagnant. Meanwhile, obstructionists in Congress play chicken over stimulus, the budget, and tax rates.

Americans are taking matters into their own hands. A new movement called the "D.I.Y. economy" is emerging. But in this context "D.I.Y." takes on a different meaning: It's not about going to Home Depot to get the parts you need to fix your sink; it's about driving economic development at the local level, with local leadership, guided by a more robust and sustainable vision.

A conference was held in July in Asheville, N.C., organized by Ashoka, Rebuild the Dream, and Mycellium School to explore the potential for a D.I.Y. economy. I spoke at this event, representing New Economy Network and American Sustainable Business Council. My blog this week will cover the conference at a high level. In the future, I'll dig deeper into some of the key ideas and innovations presented.

The D.I.Y. economy movement is broad and diverse. It starts with a rejection of the mainstream approach to economic development, an approach called "business attraction." In the business attraction model, a city or region designs a package of tax and financing incentives to attract a large corporation. The goals is to recruit a big-box store, a distribution center, or a call center.

Support Your Local Economy - Ashland, VA

This approach has many problems: First, the companies being targeted have far better negotiators than the local team seeking to recruit them. Usually the prospective employer can extract concessions that hand over most of the new economic value created. Second, there's little if any accountability to make sure the deal actually delivers the promised jobs and few if any consequences if it doesn't. Third, many of these deals damage the existing job base (for example, killing existing Main Street businesses) and these job losses are rarely factored into the rosy projections. Finally this type of growth pays no heed to environmental sustainability or social equity goals.

The D.I.Y. economy idea offers a very different approach to economic development. It brings together different elements in a new and creative mix.

  • Collaborative consumption
  • Community capital
  • Local procurement
  • Local industrial development

Collaborative Consumption—Wherever people cluster, there are assets that are individually owned but collectively underutilized. An economy can be grown by linking these assets into networks of barter and sale. Do you have an extra bedroom in your house? Rent it out on airbnb.com. Do you own a car but only use it 90 minutes a day? Rent it out when you're not using it. Perhaps you have a skill to trade: You can teach someone French and in exchange, she'll prepare your taxes.

Many pockets of the economy are asset rich but cash poor. People have skills and physical assets they're not fully utilizing, but they may have little cash. As a result, the assets languish. With some creativity and web-based technology, these assets can be identified, profiled, brought into a network, and shared in a way that supports economic development. Start-ups like Producia have ideas for connecting people with expertise to new business opportunities when cash is lacking. Unfortunately, insurance plans and legal codes have not yet caught up and these considerations limit the reach of collaborative consumption. But this will change.

Community Capital—Local growth requires local investment capital. Unfortunately major U.S. banks are not meeting the need. These banks mostly extract capital from the local level and use it to speculate in global derivatives. Several projects have taken shape in response: The "Move Your Money" initiative encourages individuals to shift their money from major national banks to local banks and credit unions. The Public Banking Institute encourages the formation of state banks, like the Bank of North Dakota, which for decades has effectively promoted and funded local development there. Crowdfunding, recently approved by Congress, is now being implemented by the U.S. Securities and Exchange Commission. Platforms like IndieGoGo help small businesses raise money, much of it local, without running afoul of complex and costly regulations that make private offerings difficult. Consultancies like Cutting Edge Capital help entrepreneurs find new sources of local, sustainable, and mission-oriented capital. Finally, a host of interesting efforts like Ingenist and Dual Currency Systems involve alternative currencies that encourage people to spend and invest locally.

Redirecting Government and Private Procurement Toward Local Providers—Development can be stimulated by helping local businesses get a piece of what local and regional governments spend on procurement. Many times, a local business can beat national suppliers on price and quality. One popular solution is to create a database and distribution network so that procurement staff can easily broadcast requests for proposal to qualified local providers.

The same approach can be applied to quasi-public entities like educational and medical institutions. Even local branches of major corporations can be enlisted to review their procurement spending and lower the barriers to local bidders.

Developing Local Industries—Certain industries offer above-average potential for D.I.Y. economic development. These industries have attracted a new generation of "social entrepreneurs" who want to build a successful business and at the same time serve a social need. In agriculture, the "farm to table" movement promotes direct distribution of fresh produce to restaurants and homes. In energy, local energy development start-ups tap renewable sources like wind and solar. Though their cost per kilowatt generated is be a bit higher, they lose much less energy in transmission. Local broadband telecommunications services provide more choice and lower prices to consumers. They create badly-needed competition for the telecommunications giants.

Another important part of D.I.Y. development is the creation of specialized incubators that support development in specific industries. Many locales now offer shared commercial kitchens where prospective restauranteurs and caterers can rent space. Advanced shop facilities such as TechShop provide access to state of the art equipment for metal working, electronics, and more. Incubators like these greatly reduce the capital that entrepreneurs must raise to develop and test out an idea. This enables entrepreneurship for many more people, and it accelerates economic growth.

National Expansion of the D.I.Y. Economy—Proponents of the D.I.Y. economy want to accelerate change. This requires spreading ideas and encouraging collaboration. It requires packaging practical solutions so they can be adopted more quickly, by more people, in more places. With little progress likely in Washington, D.C., the D.I.Y. economy is an important part of the solution we seek.

(A version of this was posted earlier at usnews.com)