04/12/23 1

New Mexico First

How Community Capitalism Can Revitalize the State Economy

04/12/23 2

04/12/23 3

Introduction

TINA vs. LOIS

04/12/23 4

TINA–There Is No Alternative

Get Toyota

Prioritize Export-led Development

04/12/23 5

LOIS–The Alternative

LO: Local Ownership

IS: Import-

Substituting Development

04/12/23 6

Overview

LOIS Is Better Than TINA

LOIS Opportunities in New Mexico

A Key Challenge: Financing LOIS

04/12/23 7

Challenges for Sustainable Community Development

• What’s Being Produced?

• How?

• Who Owns?

04/12/23 8

The Costs of Going Global

• $$$ to Lure Firms

• $$$ to Keep Firms

• Falling Standards

$0$500

$1,000$1,500$2,000$2,500

Subsidies Per Job ($1,000s)

Illinois Indiana Alabama

Reinvesting Kentucky New York

Florida Washington

04/12/23 9

Advantages of Local Ownership

• High Standards

• No Destructive Exits

• Long-Term Wealth

• Flexible RoR

0%

5%

10%

15%

20%

25%

Library Bureau RoR

Pre-Buyout Post-BuyoutBreak Even

04/12/23 10

Examples of Local Ownership

Small Business 50% U.S. Economy

Nonprofits 6.5% GDP

Cooperatives 47,000 Success Stories

Municipally Owned 6,300 Examples

Worker Owned 2,500 50+% ESOPs

Public-Private Partners

Burlington Telecomm

Community Held Ben & Jerry’s (Early)

04/12/23 11

Community Stock Ownership

Green Bay Packers

- Hybrid Nonprofit

- $25 Voting Shares

- 60% Local

- Poison Pill

04/12/23 12

IS - Import-Substitution(Community Self-Reliance)

• What are the risks of dependence?

• Why favor IS-development?

04/12/23 13

Risks of Import Dependency

• More Vulnerable

• Lower Multiplier

• Lower Tax Receipts

04/12/23 14

Healthy Economic Multiplier

UNMStudents

UNMPurchasers

NMFarmers

NM State Government

04/12/23 15

Weak Economic Multiplier

UNMStudents

UNMPurchasers

NYNYFarmersFarmers

NYNYStateState

04/12/23 16

The Perils of Chains

$0

$20

$40

$60

Impact of $100 Spending (Austin)

Borders BookPeople

04/12/23 17

Advantages of IS-Development

• Minimize Vulnerabilities

• Maximize Multiplier

• Maximize Tax Receipts $0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

Leaks in Vermont ($ Millions/Year)

Credit Card Interest Mortgage Interest

Energy Insurance Investments

Food

04/12/23 18

Self Reliance Is Not Autarky

LocalElectricit

y Demand

Wind Machines

WindmillManufacturi

ng

Import

Import

Import

OutsideUtilities

OutsideWindmillManufacturers

OutsidePartsManufacturers

NorthDakota

RestOfWorld

04/12/23 19

Community Scale Economies

Old Economy New Economy

Banking CitiCorp $100 M Assets

Energy GW Nuclear KW Wind/Solar

Manufacturing

Multinationals

Flexible Networks

Materials Anaconda Recycling

04/12/23 20

Why LOIS Is Competitive

• Inefficiencies of Global Distribution

• Energy Cost Escalation

• Environmentalism• Niche Marketing• Personalized

Services

• Brains, Not Brawn• Shrinking Subsidies• Localist Preferences• Humane Workplaces• Terrorist Resistant

04/12/23 21

Inefficiency of TINA Distribution

Food Systems

Telecommun’s

Electric Utilities

Where Food Dollar Goes

0

20

40

60

80

100

1900 1990Year

Distribution

Inputs

Farmer

04/12/23 22

Services Are Mostly LOIS

• Industrialized Trends

• Internet Trends

“A steadily rising share of the work force produces services that are sold only within that same metropolitan area….And that’s why most people in Los Angeles produce services for local consumption, and therefore do pretty much the same things as most people in metropolitan New York – or for that matter in London, Paris and modern Chicago.”

- Paul Krugman, Pop Internationalism

04/12/23 23

LOIS = Homeland Security

“Even before terrorists leveled the World Trade Center, economic and technological forces were combining to decentralize the economy. Sept. 11 will only reinforce these centrifugal forces…”

Wall Street Journal, p. 1October 25, 2001

04/12/23 24

II. LOIS Opportunities for NM

0%

100%

200%

300%

400%

NM v. US Economy

Mining Pipelines

Fed. Gov. Military

In which sectors does New Mexico produce relatively more than a typical U.S. state?

04/12/23 25

(1) Food & Fiber

0%

10%

20%

30%

40%

50%

NM v. US Economy

Apparel (15% )Leather Goods (18% )Food Products (45% )

• Trendy Clothing

• High-Value Livestock

• High-Value Crops

04/12/23 26

(2) Forestry

0%

10%

20%

30%

40%

50%

NM v. US Economy

Forestry, Fishing (13% )Paper Products (19% )Furniture (24% )Wood Products (44% )

• Reforestation

• Paper Industries

• Wood Industries

04/12/23 27

(3) Biofuels & Biochemicals

0%

20%

40%

60%

80%

100%

120%

NM v. US Economy

Chemicals (10% )

Petroleum Products(109% )

• Petrochemical Success Is Unsustainable

• Carbohydrate Economy

04/12/23 28

Oil Price Trends

WTI Crude

0

10

20

30

40

1998- 2003

$/bbl

SpotPrice

04/12/23 29

(4) Renewable Energy

0%

1000%

2000%

3000%

4000%

NM v. US Economy

Oil & Gas (36% )Electricity & Gas (125% )Coal Mining (3,792% )

• Electricity & Gas Success Is Unsustainable

• Solar & Wind

04/12/23 30

(5) Water Conservation

04/12/23 31

(6) Relocalize Retail

04/12/23 32

(7) Services

0%

10%

20%

30%

40%

50%

60%

70%

NM v. US Economy

Motion Pictures (25% )Business (63% )Educational (63% ) Legal (67% )

• Easily Filled

Gaps

04/12/23 33

(8) Home-Based Businesses

• Integrate with

Family & Community Life

• New Industrial Parks

• Zoning Reform

The Going Local Staff

04/12/23 34

(9) Manufacturing

0%20%40%60%80%

100%120%140%

NM v. US Economy

Electronics (135% )Durable Goods (54% )Nondurable Goods (31% )

• Hollow State

• Small-Scale Opportunities

04/12/23 35

Flexible Manufacturing Networks

• 90,000 N. Italy

Manufacturing Companies

• 97% Have Under 50 Employees

04/12/23 36

(10) Finance, Insurance, Real Estate (FIRE)

0%

20%

40%

60%

80%

NM v. US Economy

SecuritiesBrokers (21% )

InsuranceCarriers (50% )

Depositories(70% )

Real Estate(80% )

04/12/23 37

III. A Key Challenge: Financing LOIS

LOIS Business

LOIS Investment

0%

10%

20%

30%

40%

50%

Wealth Creation v. Investment

n

04/12/23 38

Finance Potential for LOIS

NM Household Wealth = $234 Billion

Real Estate ($72 B) Durable Goods ($14 B)

Deposits ($18 B) Bonds, T-Bills, Credit ($12 B)

Stock ($22 B) Life Insurance ($4 B)

Pension Funds ($39 B) Noncorp. Equity ($24 B)

Other ($9 B)

04/12/23 39

Localness of Financial Assets

DepositsBonds, T-Bills

Stocks

Mutual Funds

Life Insurance

Noncorp. Equity

Pension Fund Reserves

Misc.

0102030405060708090

100

Low Higher

$ B

illions

04/12/23 40

NM-PERA Investments

$Millions (Mid-2002)

$344

$2,746

$1,346

$1,646

$1,162

Commercial PaperUS SecuritiesStocksBondsInternational

04/12/23 41

Traditional Economic Development Strategy

Small Business Dev.- Entrepreneurship TA- $$$ Assistance

Banking Access- Community Banks

- CRA

Deposits

Misc.

Noncorp Equity

0

10

20

30

40

50

60

70

High Local Assets

$ B

illions

$

$

04/12/23 42

A New Economic Development Strategy

Bonds, T-Bills

Stocks

Mutual Funds

Life Insurance

Pension Fund Reserves

0102030405060708090

100

Low Localness Assets

$ B

illions

Small Business

04/12/23 43

Breaking the LOIS Monopoly

TINA Stocks

Qualified InvestorsHedge Funds

Grassroots Investors

Mutual FundsPension Funds

Venture Funds LOIS Stocks (27-J)

LOISStockCreators

04/12/23 44

Challenges to Localizing Stocks?

Low Entrepreneur Awareness of 27-J

Low Interest by Underwriters &

BD’s

Disorganized Local- Minded Investors

04/12/23 45

Challenges to Localizing Mutual Funds?

Bias Against Localization

Absence of Investment Opportunities

Arguments FOR Local Investment

1. Verify Risk

2. Local Investors As Consumers

3. Multipliers As Risk Hedge

4. Synergies

04/12/23 46

Challenges to Localizing Pensions

Absence of Local Mutual Funds

Absence of State Innovation

ERISA Provisions

04/12/23 47

What Can Private Innovators Do?

27-J Creators

27-J Underwriters & Broker-Dealers

27-J Hedge Fund & Venture Fund

04/12/23 48

Gulliver Venture Fund – Santa Fe, New Mexico

Typical VC Gulliver Fund

5-Year Growth

> 5-10 x 2 x

Type Buz. High Tech Ma & Pa

Stage Start Up Mature Buz

VC Ownership

>50% <50%

Exit Strategy

Global IPO Local DPO

04/12/23 49

What Can State Government Do?

(1) Refocus Subsidies

(2) NM Stock Market

(3) BIDCO Legislation

(4) Tax Credit for Local Pensions

(5) Reinvest Public Funds Locally

04/12/23 50

State Investment Council

$6,298

$3,539

$275 $239 $70

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Equities Bonds EmergingMarkets

Partnerships NM Buz

$Millions Invested (mid-2002)

04/12/23 51

What Can Philanthropy Do?

Planning Studies of indicators, assets, and leakages.

Training Incubators, training centers, mentorship programs.

Investing Development local banks, mutual funds, retirement accounts, VCs, and selective G investment. Plus PRIs.

Purchasing

“New Mexico First” campaigns through local directories, B-C credit cards, B-B marketplaces, B-G purchasing.

Policy Research and advocacy to reorient subsidies, taxes, zoning, and wage policies to support local business.

04/12/23 52

The 21st Century’s Choice

04/12/23 53

For More Information:

Michael Shuman

202-364-4051

shuman@igc.org