Economic Development and Community Coherence

Posted August 25, 2019
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Contributor

When most economists talk about economic development, they discuss macroeconomic indicators such as annual GDP growth, nationwide employment statistics, and international trade deficits or surpluses. While all of these facets of macroeconomic policies certainly do affect the lives and livelihoods of small communities and their members, small businesses continue to play an extremely important part of community wellbeing. In fact, the U.S. Small Business Administration finds that small businesses in the United States make up “99.7 percent of U.S. employer firms, 64 percent of net new private-sector jobs, 49.2 percent of private-sector employment, 42.9 percent of private-sector payroll, 46 percent of private-sector output, 43 percent of high-tech employment, 98 percent of firms exporting goods, and 33 percent of exporting value.”

Besides the obvious economic value that small, local businesses offer to both urban and rural communities across the country, the entrepreneurial mindset also greatly contributes to a greater sense of community coherence and unity. Economic growth is needed for a community to flourish as this contributes to a greater sense of prosperity and economic security. However, much economic growth is often focused on sucking capital out of communities. For example, a foreign corporation that is creating jobs at a factory in a community will certainly provide a source of income for many people within that community, though the profit will be siphoned away from that community.

When dynamic economic growth is spurred along by locally owned and operated businesses, however, there is a much greater effect on the community. More individuals who create thriving local businesses that provide services and products for the allows profit to circulate within that community. Furthermore, when people buy from businesses within their communities, a deeper sense of trust and community coherence is created. People prefer to purchase goods and services from people they know, and this, in turn, creates a cascading effect that further strengthens community unity and strength.

Entrepreneurship has long been considered one of the strengths of this country. While there is certainly a large percentage of small businesses that fail within the first year, strong communities that exhibit high levels of trust and where a thriving local business scene exists can reduce the vulnerability that comes with starting one’s own business. Entrepreneurs who have a community they feel they can trust, along with a community of consumers who trust local businesses creates a win-win relationship that reinforces both the local economy and the sense of community belonging.

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