I was in Cheraw, South Carolina on Monday. Cheraw is up near the North Carolina border, on the edge of the Great Pee Dee river. There’s a fabric weaving company up there to which I brought a big thirty-foot long machine shipped from Germany. Two of my fellow drivers brought the other parts of the machine earlier in the day. Unfortunately for all three of us, the biggest part of the machine was so heavy that in transport it ended up breaking through the floor of the container it was loaded into. I arrived at 1pm and they’d been struggling to get that heavy thirty-foot-long piece out of the container all day.
Coincidentally, a couple of the guys waiting for the machine to get off the truck were the same guys I met a few months ago in Anderson, South Carolina, near Greenville, who were waiting for a similar machine I was delivering for a company that was going to start weaving carbon fiber fabric. It turns out these two guys work for the German company that makes the weaving machines. Their job is to reassemble the machines after they come off the truck. One of the guys is from Germany. The other is a young American kid. They told me it was going to be at least another two hours before they’d get to my truck. So I headed off to have lunch, and write most of this.
I walked through downtown Cheraw looking for an open restaurant and finally found one. Cute town, named “the prettiest town in Dixie” by some PR genius a few decades ago. It seems like Cheraw’s heyday was back in the 50’s, as is true for so many towns in America. It’s the classic one and two-story brick-building store-front downtown, lined with shops. Looks like they had some money for downtown revitalization in the last twenty years as all the curbs are new and wheelchair accessible. Unfortunately, as I’ve seen all over America in the hundreds of little towns I’ve visited over the past few years, the majority of the shops are vacant and for rent or sale. The few shops still in business are always advertising sales – “Christmas in July Sale” I saw here – trying anything to get people to come back in. It’s so sad.
Surrounding the downtown section of town is a collection of Craftsman, Colonial, and Georgian-style houses, mostly well maintained with nice landscaping. Old houses always make me a little nostalgic for small-town American life. But I’ve been there, I’ve done that, and I don’t see how I’d ever go back. But it’s still such a comforting dream. Further out from the downtown residential area are the strip malls from the seventies, now also mostly vacant except for a bunch of paycheck advance, and “Financial Services” companies milking money out of the poor. And further out from them are the blight of generic American consumerism – McDonalds, Burger King, Subway, Pizza Hut, KFC, AutoZone, CVS, Walgreens, Exxon, BP, Kangaroo, Dollar General, and WalMart.
Robert Reich, labor secretary in the Clinton administration and creator of the movie “Inequality for All”, would say it’s no wonder that the heyday of these small American towns was those twenty-something years after World War II, when America was more “equal” than any other time before or since. (Well, more “equal” if you were white. America certainly had other problems, but a stagnant economy wasn’t one of them.) Personal income tax levels as high as 90% during those years ensured that wealth could not concentrate in the hands of a few people. The American middle-class truly was leading the world, when the modest salary of a high-school janitor, or the meager income from running a small radio and TV repair shop was enough to provide for a comfortable life – as my great uncle and my grandfather were both able to do.
But I’m not convinced that what made America such a comfortable place to live in those decades after WWII was solely a tax policy keeping people from becoming obscenely wealthy. Especially since the federal government had no way to spread those collected tax dollars out to little communities like Cheraw. I think the key to the economic boom of those post war years was where people invested the dollars they saved. In those twenty years, thousands of individual local banks collected saved dollars and loaned dollars out to local businesses and individuals – people they personally knew in the community. Few people owned stocks or bonds so most dollars “invested” stayed within the local community in which they were earned, to then be redistributed to other members of the community for other business opportunities.
Knowing my interest in economics and federal monetary policy, a few months ago a friend sent me what was supposed to be a joke about our monetary system, but that I think is an excellent demonstration of what dollars are – just an exchange mechanism for credits and debits. Here’s the joke.
A West Texas town suffering from climate change induced drought, (I just added the climate change stuff for fun. I’ve been in West Texas plenty the last few years and it IS suffering from climate change. Those poor people are running out of water and there’s no way around it.), is visited one evening by a city-slicker from Dallas on his way west. He slaps a hundred dollar bill down on the front desk of the only hotel still operating in town and says to the manager – “I’m gonna go check a few of your rooms and see if they’re up to my standards”. As the city slicker heads up the elevator, the manager grabs the hundred dollar bill and runs next door to the only remaining bar in town and pays a hundred dollars off his tab. The bar manager grabs the hundred dollar bill and runs down the street to the liquor distributor and pays part of HIS tab. The liquor distributor hands the hundred dollar bill to his truck driver to make up for some of his back pay. The truck driver runs over to the grocery store to pay for last week’s groceries. The grocery store owner runs over to the local prostitute and gives her the hundred dollars for services rendered. And the prostitute calmly walks across the street to the hotel and places the hundred dollar bill on the counter to pay for the room rentals she’s accrued. Just then, the elevator dings and the Dallas city-slicker steps out, grabs his hundred dollar bill and walks out of the hotel saying “these rooms don’t meet my standards.”
An economy is simply the exchange of services and goods. Dollars are simply the mechanism for keeping track of those exchanges. Towns like Cheraw have similar financial relationships to that West Texas town. Unfortunately, most people and businesses today won’t extend “credit” – instead requiring dollars in payment at the time of purchase. Cheraw isn’t suffering from a lack of opportunity for commerce. I’m sure plenty of people in Cheraw are willing to buy and sell things. Unfortunately a large percentage of Cheraw residents, and all of America is suffering from a lack of dollars in their local communities – the dollars required to make the buying and selling of things possible.
Unlike during the post-war economic boom, today, people with money to invest are presented with investment opportunities that don’t even include a “local” option. Our saved dollars in banks, IRAs, 401ks, etc., are most likely invested in stocks and bonds and mutual funds from companies and municipalities nowhere near where we physically reside - eventually ending up in Wall Street banks and financial institutions. In our quest for greater and greater investment returns, Wall Street has come up with riskier and crazier financial securities we can invest in. Where those dollars actually go, we don’t care as long as the returns are good. That quest for maximum returns while ignoring our own communities is a serious problem and it’s destroying our country - especially our small towns.
Is it any wonder that towns like Cheraw, or other American small towns are slowly dying from a lack of access to dollars when the vast bulk of investment dollars are locked up in the accounts of Wall Street banks and investment companies, and multi-national corporations? What’s killing our small towns is not a lack of investment opportunities but a lack of dollars to fund those opportunities.
I have the benefit of many hours of quiet thinking time every day as I drive the highways of the Southeast. (In fact I think the lack of quiet thinking time for most Americans may be the most serious problem facing our society. Good topic for another essay.) Lately I’ve been using those hours to test my five legislative actions against the realities I face as I visit companies and towns in the Southeast. Visiting Cheraw confirms my thoughts that Local Community Mutual Funds (LCMFs) could enable towns like Cheraw to thrive once again. The wealth in the Cheraw community was evident in the well-kept historic homes. Unfortunately, most of that wealth is probably invested outside the community. Probably most of that wealth is invested in Wall Street. And more and more of those dollars are being sucked out of Cheraw every day.
Think about it. With WalMart being the only big retail store in town, most of the dollars Cheraw residents are spending at WalMart to purchase necessities for their increasingly desperate lives are leaving Cheraw and finding their way into the billion-dollar bank accounts of the Walton family. The same for necessities purchased at Walgreens, CVS, Dollar General, Exxon, KFC, McDonalds, etc. All those companies pay debt-slave wages to their local workers and ship the profits back up to the corporate headquarters, most likely putting their earnings into – you guessed it – Wall Street financial institutions. With so many dollars of Cheraw residents leaving town, how do dollars come INTO Cheraw? Only through companies like the one I delivered to, able to produce something in Cheraw that is sold somewhere else, giving those “foreign” dollars earned to the local employees. And Cheraw is fortunate to have a small state-funded college in town, a local Department of Transportation crew, and other state of South Carolina funded agencies.
And yet, collectively, the wealthiest of the fifty five hundred Cheraw residents likely have a few hundred million dollars invested in stocks, bonds and mutual funds all based on Wall Street. If the residents of Cheraw were incented to withdraw those funds and instead pool their investment in a Local Community Mutual Fund to be distributed as equity investments, loans and grants to local entrepreneurs, established businesses, non-profits and individuals, it’s quite possible that Cheraw could see a renaissance of entrepreneurialism and creativity. Additionally, Cheraw could experience an increase in property values, a decrease in unemployment and poverty, and an increased quality of life for all Cheraw residents. A hundred million dollar Local Community Mutual Fund, coupled with a “buy-local” campaign to keep more dollars from leaving the town, could make the difference between Cheraw continuing to die a slow death from dollar-drain, or Cheraw reviving into “the prettiest town in Dixie”. I’d love to see that. All across America.
What’s the point of having a few million dollars in your retirement account if the town you’ve spent most of your life in, the town in which all your friends live, has become somewhere you no longer want to live? Let’s invest our dollars where we live. Buy local. Invest local. A good quality of life involves more than just lots of money in the bank.