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Thinking Globally, Acting Locally: Promoting Employee Ownership at the Subnational Level 

by: Logue, John
Source: Capital Ownership Group and Ohio Employee Ownership Center 

There are at least six reasons why we should be concerned with encouraging employee ownership at the subnational level: at the level of the state, the province, the region, the municipality, or other subnational governmental units or at the level of the industrial branch, cutting across governmental geographic units.

The first is that in many governmental systems, particularly federal systems, legislative measures beneath the national level may be effective in promoting broadened capital ownership. In many federal systems, the writ of the federal governmental does not extend beyond broad national agenda items; state and local legislation speaks to the local economic development questions.

Second, in larger nation states, be they federal or unitary in structure, the national government is not a very effective provider of technical assistance for companies, employee groups, retiring owners, unions, or community economic development groups. Subnational provision of technical assistance through state, provincial, or municipal programs, or through non profits—501(C)(3)'s in the United States, and their equivalents elsewhere—and industrial associations is far more efficient and appropriate.

Third, employee ownership is, in its nature, not only a strategy for broadening capital ownership at the national level, but also a strategy for anchoring capital and jobs where employee owners live. This localistic strategy is best implemented through subnational action.

Fourth, employee ownership is intrinsically a micro economic strategy, implemented at the level of the firm. As we will discuss below, many of the opportunities available for employee-owned companies are available at the local level where the companies are situated and where their employees live. These areas of activity include collaborative networks, training cooperatives, establishing employee-owned supplier networks, and other strategies for community involvement. The substantial multiplier effect that employee-owned companies can have in spreading employee ownership and increasing community economic activity takes place typically at the state or, more generally, municipal levels.

Fifth, employee ownership tends to stabilize local and state economies by anchoring capital and jobs. Moreover, its productivity enhancing effects 'help to narrow the divide between those who favor and those who fear more growth in Hawaii by slowing workforce/population growth in future economic expansions which, in turn, could reduce the need for wage cuts and lay-offs in future recessions' (Tom Brandt, 4/4/2000; see also his 'Impossible Dream for Hawaii's Future?' 9/10/99).

Sixth, with economic globalization, the nation state gradually ceases to be the appropriate unit for economic policy, and the traditional national economic management tools—whether fiscal, monetary, or exchange rate policies, capital transfer restrictions, domestic content, requiring a controlling domestic ownership stake, domestic preference in the award of public contracts, etc.-- cease to be effective or are struck down by international trade rules. In this environment, employee ownership is a particularly attractive alternative, especially for high wage areas.