LOIS%20(Local%20ownership%20import%20substitution)

1
LOIS (Local ownership import substitution)  vs.
TINA

• Which best promotes sustainable communities?

2
What is LOIS?

• It is not autarky, which is the absence of
  imports and exports
• Decentralization and local control over the local
  economy

3
What are the Characteristics of LOIS?

• A relative large part of the economy is dedicated
  to local production for local needs
• Local economy is diverse
• Government policies favoring local business for
  local needs over large export-oriented
  corporations (opposite is currently true)
• Business/corporation/bank owners are part of
  community, have vested interest in community
  building
• Economic growth is not only criteria for success

4
Why do conventional economists oppose LOIS?

• Small is stupid
• Trade is always good
• Economies of scale
• Seen as outside restriction on free market, and
  free market is always best
• Market economics is faith based ideology, not
  science

5
History of ISI

• Latin American countries engaged in ISI in 60s
  and 70s, based on advice of their own economists
• Overvalued exchange rate to make imports of
  capital goods cheaper
• High tariffs and barriers to imports, protect
  infant industries
• Brazilian Miracle worlds highest growth rates
  for nearly 20 years
• Japan, Korea, Taiwan also used ISI

6
Why did it fail in Brazil?

• Oil crisis, few local sources of energy
• But growth kept on, after crisis stagnated
  development in rest of world
• Petrodollars at low interest
• Reagan deficit and interest rates
• Latin American debt crisis
• Income inequality
• Can it be considered a failure?

7
What Happened in Asian Tigers?

• Land reform and income distribution created
  domestic demand for domestic industry
• ISI developed industrial capacity, skilled
  workers
• Extensive government control over direction of
  economy
• Allowed them to compete internationally
• Can everyone engage in export led growth?
• Economists gloated when Asian flu struck

8
Any other examples of LOIS?

• Where do countries protect their domestic
  industries from competition?
• Agriculture
• Steel
• Airbus

9
Obstacles to LOIS
10
Competition between states, cities

• Whats the TINA approach to stimulating state,
  local economy?
• Think of Burlington and IBM
• Entice large corporations with tax breaks, free
  land, free roads, free electric, sewage and water
  infrastructure
• Where will corporation go?
• How much will states offer to attract them?

11
Whats the outcome?

• Alabama pays Mercedes Benz 200,000 per job
  created
• Plus low wage workforce and weak unions
• Where did it get the money? Education and
  pensions funds
• Kentucky paid 350,000 per job to Canadian steel
  company
• Corporate mobility Boeing, Northwest, etc.
• Fancy lingerie and fine meals for a philandering
  husband?

12
Competition between countries

• Mexico and China
• Textile quotas ended January 1
• NAFTA course
• The rust belt in the US
• White collar jobs to India, Philippines, etc.
• Whats the impact on your future?

13
US tax policy, the anti-LOIS

• If IBM makes 1 billion per year in Vermont, and
  pays 100 million in Vermont taxes, it must pay
  Federal taxes on 900,000 million, say 180,000
• If IBM moves to India, earns 1 billion/yr and
  pays 100 million in Indian taxes, it deducts
  that amount from US federal taxes and pays 200 -
  100 100 million

14
Announcements

• NAD groups are contracts in? I am eager to work
  on a project with you, but no one has contacted
  me.
• You will all need to figure out how to submit
  your work via the Projects site.
• Sorry for the delay on posting reflection 5. You
  can always write a standard reflection.

15
Implementing LOIS
16
Community corporations

• Community stock ownership plans
• Limit company ownership to local community, e.g.
  Greenbay Packers
• Whats the impact on mobility and economic
  stability?
• Whats the impact on pollution and environmental
  degradation?
• Would Bhopal have happened if CEOs lived next
  door?
• Employee stock ownership plans
• Whats the impact on productivity if employees
  own a company?
• Mondragon worker owned, twice the profits of
  average Spanish Corporation.
• What about economies of scale?
• In Northern Italy, small corporations collaborate
  on big projects

17
Community banking

• Large banks reluctant to make small loans
• Do not know local people, have a harder time
  judging credit-worthiness
• Poor areas do not have banks, and when they do,
  deposits are invested elsewhere
• Community Reinvestment Act
• Community development financial institutions
• South Shore Bank of Chicago and refurbishing low
  income housing
• Mondragon bank and new cooperatives

18
Policy

• Supporting local, sustainable agriculture
• Will the current approach even be an option with
  scarce oil?
• Recognizing cultural heritage and environmental
  amenities as economic assets
• Why do businesses move to Vermont?

19
Policy

• Subsidies for local businesses, not mobile
  corporations
• Bringing business back downtown
• Tax land, not buildings
• Transportation

20
What is Burlington doing to promote LOIS?

• Intervale, community gardens and local food
  production
• Efficiency Vermont and BED
• No box stores
• Revitalizing Church Street
• Burlington Bread
• Community development banks
• What are your projects doing?
• What else can we do?

21
Impact on Natural Capital

• People see the direct environmental impacts of
  what they consume
• Business owners suffer directly from the impacts
  of their business
• What impact is this likely to have on community?
• Negative feedback loop
• Example of electric meter

22
Lake Imandra, Kola Peninsula, Russia
23
Human Capital
24
Impacts on Wages

• How do export promoting countries gain a
  comparative advantage in exports?
• How do ISI countries stimulate their economies?
• The Ford philosophy
• The Wall-mart philosophy
• Impact on wages
• Impact on social services

25
Health impacts
26
Social Capital

• Loyalty to producers
• NYT article on Japan
• Sense of responsibility to consumers and
  community
• If businesses are less mobile, people will be
  less mobile

27
Built capital

• Corporate mobility infrastructure abandonment
• Built capital design less likely to have negative
  impacts
• Built capital likely to be more durable

28
Conclusions

• LOIS may decrease built capital and consumer
  goods, but is likely to protect other 3
• LOIS is an alternative
• If oil supplies are indeed finite, and we do not
  come up with substitute, LOIS is the only
  alternative