I have to get something off my chest. It annoys me when there is an announcement that Zarraffa’s is opening in Booval and the Facebook post gets a crazy amount of likes. It annoys me because of the number of great, locally owned coffee shops we already have in Ipswich. When you go through the list of all the small business startups to create a more lovable community, and the kinds that don’t require you to have an MBA just to operate, coffee shop is on that list.

Coffee shop, bakery, pizza, doughnuts, butcher, bodega… In my mind I see these as being familial businesses, ones that the neighbourhood starts to see as they hit that critical mass of activity.

In economic development speak, these are called Stage 1 businesses.

Capitalism for Everyone (who has money)

But if you are wanting to start a Zarraffa’s Coffee, you need $800,000 plus working capital. Not exactly small business friendly.

So what does this mean? Zarraffa’s aren’t looking for up-start young entrepreneurs, they are looking for investors. They want people on the ground who already have money, and they use these people to assume the bulk of the risk so the investor’s interests will be aligned with Zarraffa’s corporate stakeholders.

This is a very different situation — and creates some very different incentives — for a city than the coffee shop started by a local go-getter with a dream.

In the situations where a Zarraffa’s opens, instead of seeing the local entrepreneur boot-strap themselves into some wealth, they may get hired as the manager of the Zarraffa’s and see a manager’s pay and benefits, modestly above the other employees. They won’t see any of the wealth or any appreciable returns over time for their effort. Those will go to the investor (who has already amassed wealth enough to afford the $800,000 franchise fee) and Zarraffa’s Corporation.

So how does this change the local community? Why should they care? The city will still see the investment. Tax revenues are going to go up, and they will still get the permit fees. There will be new job opportunities, and you residents will be able to get coffee all without having to leave the comfort of their car. How could this not be a good thing?

Well, there are a lot of reasons, but I’ll go into the most important in my opinion… Balance of Trade. Looking at the balance of trade is common practice when we think of trade between countries, but not as common when we measure the flow back and forth across states, or localities, it all ends up in the GDP statistic, so everything is good.

But when we look at it from a very local level, when we view it from the community, the levels that the council should be looking, what we see is a transfer of local wealth to entities outside the community. Zarraffa’s Corporation isn’t in Ipswich, and the franchise owner may not even be from here. When we exchange our money for coffee at Zarraffa’s, or any other chain — coffee, burgers, sports goods, or office furniture — we see the accumulated wealth of the neighbourhood leave our local market. This is capitalism.

Localism

But there is another kind of capitalism — local capitalism — where the local entrepreneur is encouraged to start their shop. But with this capitalism, the transactions are very different. In local capitalism you still see an exchange of money for service, but the money stays in the local market — at least for a while longer. Economic development people call this the local primer.

I won’t judge the merits of capitalism, but I think we can all grasp that local capitalism has a much different outcome than national capitalism. Local capitalism will help the community retain their wealth.

Look at this in the long run… The local up-start coffee shop owner starts the shop and over the decades they gradually build their business and create a modest amount of wealth for them and their family in the process. In the national model, the motivated local may become the manager of the franchisee — working for someone else. They may get some corporate profit sharing, but likely not because Zarraffa’s is a private company, and even if they did it would be completely disconnected from their daily work. They won’t get wealthy from this job.

The Costco Effect

Which brings me to Costco…

People say it’s great that Costco is coming to Ipswich, but I disagree. Is it really worth all our money leaving the community so you can save 10 cents on toilet paper? Were you not able to wipe your ass before Costco arrived?

According to this piece of “journalism” from the QT Costco sells: Fresh food, snacks and candy, dry groceries, frozen food, designer clothing, cosmetics, housewares, office supplies, sundries, jewellery [sic] and watches, books and media, health and beauty, lawn and garden, designer clothing (again), small appliances, and televisions and computers.

So what does this mean for local businesses that deal in those commodities? Well, if you have a look at Costco’s own economic impact assessment, it means a lot. They fully anticipate that they will draw almost $33 million from their Primary Trading Area.

But it’s OK, Costco has addressed this in their assessment. “Ipswich City Heart Development have a very different role and function compared with the member-based wholesale warehouse model operated by Costco.”

So, just do as the former Division 7 Councillor says and “see it as an opportunity”.

Seen it all Before

But the sad thing is, I’ve seen this all play out before. I moved here from Canada, where Walmart has been heavily investing in recent years. I see what happens to all the local businesses when a Walmart Supercentre opens 5 km from them. They hold on as long as they can, until there is no choice but to close — when the old shoe store owner (and your neighbour) has to close his business and now works in the shoe department at the same Walmart that said it would be good for the neighbourhood.

So, let’s see it as an opportunity! Now you too can close your shop and work in Costco selling the products you love and watch as the money people spend go to Costco corporation. Yay Capitalism!

A Sad Irony

Where this really breaks down is in the cognitive dissonance that former Councillor David Martin suffers from when he is saddened that local businesses are closing after 120 years.

What David doesn’t understand is that these two events, the opening of Costco and the closing of Rawlings, are the result of the same choices made by council. He can change this, if he wanted to.

But he fails to see the connection.

What can I do?

To return back to the title — what has happened to entrepreneurship? It’s still here, it is just a bit harder to see.

But you can help. Here are a few recommendations to get you on your way.

Things you could do:

Create a culture of community support. Enjoy a walk around the top of town and look in a few shops. Buy local where you can. Get to know the owners, or the staff that serve you. It helps when entrepreneurs feel that the community is invested in their well-being. Build a safe, clean, and enjoyable neighbourhood. Ipswich should be a place where people want to live. Safe streets, safe parks, safe neighbourhoods. This, along with a vibrant CBD, and other amenities add up to a good quality of life. Support school — both private and public. Strong education is one of the key areas for quality of life. When our quality of life is high we are better able to participate. Promote walkable business districts. Walkability is a huge factor when it comes to small local business success. In a concentrated, walkable neighbourhood you can get everything you need from the multitude of businesses. As a bonus, walkable neighbourhoods demonstrate far greater tax revenue per square metre than all other types of development. Love your city. This is the most important, love the place you live and know that the people who own shops in Ipswich own them for the same reason — because they love it here too.

When local small business flourish, so does the local economy. So many people in our community have vision and drive, they just need a way to get started. Help them by giving them a platform. You can help give our city a vital lifeline by which it can sustain itself and grow.