From Monopoly to Community Prosperity
How Local Governments Can Reclaim Economic Development
For every dollar spent at a local business, 75 cents stays in the community. Spend that dollar at a chain, and only 25 cents stays
Every dollar matters
As Joe Minicozzi of the public-finance consultancy Urban3 likes to point out, “For every dollar spent at a local business, 75 cents stays in the community. Spend that dollar at a chain, and only 25 cents stays.”
Local businesses are much more likely to recycle wealth, hire local accountants and attorneys, and sponsor Little League teams and community events. Big chains and monopolies tend to siphon money away to distant headquarters and shareholders. When it comes to economic development strategies, however, many local governments still focus too much on attracting new businesses and not enough on cultivating the homegrown businesses already serving residents. As I’ve written in the past, that’s like “trying to fill a bucket with holes in the bottom.” A sound strategy must build on supporting the people already investing in your community.
How Chain Stores Drain Local Wealth
Extracted wealth flows away.
Brendan Ballou, a former special counsel in the Justice Department’s Antitrust Division who has written extensively about the harms of private equity, warns that business consolidation often leaves communities paying more and earning less. “What used to be the local five-and-dime is now a Family Dollar,” he told me. “Wealth that once circulated in the community now flows to investors who don’t live there.” Places run the risk of becoming modern “company towns,” reliant on one or two dominant employers with all the leverage to dictate terms and extract subsidies. “Private equity firms often promise to solve local budget shortfalls,” explains Ballou, “but their short investment horizons mean short-term fixes that leave communities worse off in the long run.”
Land use and zoning tilt the field.
Kennedy Smith of the Institute for Local Self-Reliance observes that many comprehensive plans talk about cultivating vibrant local economies, but their zoning codes continue to permit sprawl, impede small-business retail, and drive the proliferation of dollar stores, cookie-cutter chain restaurants, and other corporate chains. The result for local governments: more infrastructure to maintain, reduced economic activity in downtowns and neighborhoods, and less local control.
Subsidies entrench inequities.
Development incentives and tax abatements are disproportionately awarded to large corporations and wealthy areas, exacerbating systemic inequities. I saw this firsthand in my audits of development subsidies in Kansas City, which revealed that incentives were not only a poor use of taxpayer dollars but also racially skewed.
Procurement costs more. Basil Musharbash, an antitrust attorney, notes that monopolization has narrowed the field in fire truck manufacturing, municipal software, and other goods local governments rely on. In some cases, cities are now waiting years and paying triple for basic equipment. The ILSR’s research shows that Amazon’s dynamic pricing, for example, often leaves governments paying more than if they had purchased locally.
As Keldon Bester of the Canadian Anti-Monopoly Project cautions, “The march toward monopoly is a one-way street, easy to walk down, very difficult to reverse. Local governments have to be intentional about keeping options open.”
The question, then, is how to turn that intention into practice? What strategies can communities use to shift from succumbing to monopolies toward building their own prosperity?
A Better Economic Development Playbook
Reorient from attraction to cultivation. Running for mayor of Kansas City, I argued that city leaders should stop chasing ribbon-cuttings and focus on engaging the businesses already rooted in our community.
Once elected, I launched a “New Tools Task Force” to redirect redevelopment toward long-neglected eastside neighborhoods. The 30-member coalition proposed innovative approaches — from streamlining permitting and offering “premium” incentives in distressed areas to creating a community-development credit union to expand access to capital. While not all of the recommendations were immediately implemented, the effort reframed Kansas City’s conversation around equitable development, and its signature idea has since borne fruit: For example, in 2022 the WeDevelopment Federal Credit Union opened its doors, channeling investment into the neighborhoods the task force set out to serve.
Invest in quality of place. Strong schools, safe neighborhoods, parks, and other amenities are the true magnets for talent and investment. Research from Brookings shows that these factors, not tax rates, drive relocation decisions. Advocates like Strong Towns have long argued that prosperity flows from creating places where people want to live, not from subsidies handed to footloose corporations.
Revisit incentives. Local leaders must scrutinize development deals for long-term value, not just job counts. As Pat Garofalo of the American Economic Liberties Project puts it, “Don’t chase the shiny object. Long-term prosperity comes from investing in people and local businesses, not subsidizing Fortune 100 names.”
Strengthen local capital and ownership. As traditional banks consolidate and small-business lending dries up, local governments can step in to build alternative pathways to capital. Community development financial institutions and other public financing tools keep wealth circulating locally rather than siphoning it away. As noted above, the community development credit union that emerged from the New Tools effort in Kansas City is now doing just that — giving low-income residents a foothold to start businesses and build assets.
Concentrated market power is proliferating nationally and globally, reshaping everything from retail to finance, housing and tech. The only effective way to push back is from the ground up. That’s why local leaders — mayors, economic development directors, planners — must get creative in deploying tools and strategies that build prosperity from within.
Please reach out if you have ideas, questions about where to start, or want to explore what’s possible for charting your own homegrown path to prosperity.