The city of Flint, Michigan, is now in the early stages of recovery from one of the worst man-made disasters in United States history. Ten thousand children have been exposed to high levels of lead in drinking water due to switching the water supply from Lake Huron to the Flint River, all in the name of saving money. The decision was made by Flint’s Emergency Manager, who was installed by Governor Rick Snyder to “fix” the ailing economy of Flint. This decision will cost taxpayers hundreds of millions of dollars in lawsuits, insurance claims, medical expenses, property losses, and emergency infrastructure spending over the next twenty years. And since lead poisoning causes irreversible brain damage, hundreds or thousands of children will suffer for the rest of their lives.
For most of the 20th century the economy of Flint was dominated by one company: General Motors. Then something happened: General Motors began to collapse. In 1978, the company employed 80,000 people in Flint --- roughly half the population. By 2006, the number of people employed at General Motors in Flint had dropped to 8,000.
As the jobs disappeared, the city’s infrastructure decayed, poverty increased, and people moved out. Today, Flint has just over 100,000 people, roughly half as many as in 1970. Flint has one of the highest child poverty rates in the country, and one of the highest crime rates. The city appeared to be making a comeback recently, but the damage from the lead poisoning crisis is likely to last for decades. Who wants to buy a house in a high poverty, high crime area with poor schools, decaying infrastructure, unsafe water and untrustworthy local government?
While most recent articles on Flint have focused on the Emergency Manager, the Governor, and the EPA, it is useful to look at Flint from the “localist” point of view. Would the city of Flint be in better shape today if they had invested more in local businesses and resisted the temptation to rely so completely on General Motors over the past fifty years?
Many studies have shown that communities with a high concentration of locally owned small businesses tend to be more stable with respect to economic cycles. They also aren’t as dependent on any single company or industry, so if a business moves to another city, or an industry slows down, the local economy survives the disruption.
Flint, on the other hand, was the poster child for business concentration. The entire local economy depended on one employer, so when General Motors did well, Flint did well. And when General Motors fell down, it took Flint along with it.
Corporate executives claim they are fountains of creativity. But that is mostly a myth. In 2011, Google, one of the most creative corporations in the world, spent more on litigation and lobbying than it did on research and development. And General Motors --- famous for their soul crushing, slow moving bureaucracy --- was one of the least innovative companies in the world.
It is hard to imagine this lack of innovation did not carry over to other businesses in the city of Flint. The collective attitude was “if it’s good for General Motors, it must be good for Flint”. While that seemed to be true for many years, that mindset most likely contributed to the decline of Flint, since there was no tradition of entrepreneurship, invention, or innovation. So when General Motors fell down, nothing was ready to take its place.
Communities with high concentrations of independent, local businesses tend to behave very differently. They tend to attract diverse groups of independent-minded people who develop their own distinctive cultures and traditions, rather than importing them from national chains and large corporations. Such communities tend to be much more resilient when disaster strikes. Instead of depending on big corporations to bail them out, they help each other get through the tough times.
Small businesses also tend to be much more accountable to the local populace than their non-local counterparts. Small, local business owners tend to live where they work, whereas corporate titans usually live elsewhere. And even when corporate managers live nearby, the stockholders and financial decision makers live far away (Wall Street, Omaha, Bentonville, etc.)
In the case of Flint, even before General Motors started to decline, the corporate headquarters had moved to Detroit --- some 60 miles away. Executives had no personal ties to the Flint community, and had no interest in supporting local causes. This made it easier for them to lay people off and close plants. And since they had so few ties to the community, helping the displaced workers wasn’t their concern.
Since local business owners live nearby, they tend to participate more in local government. That means they come to town hall meetings, and vote in local elections. They lobby for better policing, better schools, safer streets, nicer parks, and cleaner waterways. And since local businesses tend to be smaller and more interdependent on their neighbors, it is much less likely that one business will dominate all the others. In other words, local businesses have a lot of power collectively, but very little power individually.
This is the exact opposite of Flint, where General Motors dominated everything, and all other businesses were subservient. It worked out reasonably well when General Motors was on top, but was a disaster otherwise.
But as Michael Moore points out, despite their smaller footprint in Flint today, General Motors still gets preferential treatment. While thousands of children were being poisoned with lead-contaminated Flint River water, Governor Snyder set up a special Lake Huron hookup for the General Motors plant in Flint at a cost of $440,000.
Ultimately, the Flint water crisis may lead to something good. Maybe people will finally realize that “big business” isn’t necessarily always “good business”. Strong and stable communities usually have a high concentration of locally owned, independent businesses that work together to protect their people, their natural resources, and their economic well-being.
Unfortunately, Flint never did.