Extractive Economics:
Why communities are getting poorer & what to do about it

Are the people of your community getting richer or poorer? Well, by isolated metrics, like wages and 401ks, one could argue richer. But, by lived experience, in relation to the important expenses of our lives, and in our ability to build wealth over time, the clear answer is poorer. Economists have shrugged their shoulders for years about what they are now calling the “K” economy. The top is getting richer while the middle and bottom are getting poorer. But this is no mystery. This relationship is not just correlated, it is causal. And the reason is woven throughout our economic system.

Economic Development

Economic development exists to improve a community’s well-being. Yet, I get strange looks when I ask economic development professionals for a simple measure of that well-being. I ask: What is the median net wealth of the people in your community? In other words, are the people you represent getting richer or poorer? Most economic development professionals don’t really see this question as lying in their realm of work. They are usually well equipped to tell me how many jobs have been created, how many millions of dollars have been invested by large businesses, and how many spec buildings or commercial lots have been sold. These are their stated Key Performance Indicators (KPIs). But they don’t track, or even work to affect, metrics that actually directly measure the economic well being of the people in the community they serve, even though that is the reason their jobs exist. I don’t mean to throw shade on these hard-working professionals. Most of the economic development folks I’ve met are knocking it out of the park—recruiting employers, marketing property, and growing tax base. They are functioning with success in the existing system in which they operate. But, job counts measure activity, not affordability. Payroll totals measure income, not wealth retention. Incentives often subsidize firms whose profits leave the community before they add any accumulation value. The result is that many communities experience rising fragility not just alongside their economic development success but in some ways because of it.

When a Dollar General or a Wal-Mart comes to town, there is great buzz and celebration. Millions of dollars are invested. Construction jobs are created. Retail jobs are created. But over time, these corporate-owned, low-cost retailers function to extract wealth out of the bottom of the community, while paying wages below the cost of living. This compounds in housing instability and, ultimately, the perpetuation of generational poverty. Thus, what looks like an economic development win—jobs created, millions invested, tax base increased—turns out to be a net wealth loss for the community over time due to the mostly invisible system of extractive economics that pervades our nation’s economy.

People Are Getting Poorer

If wages have risen, then how can I say that people are getting poorer? The reason is because economic security is not determined by income in a vacuum. It is determined by margin, which is the space between what people earn and what life requires them to spend (and what is used to build wealth over time).

Over the past several decades, the cost of essential goods and services has risen faster than wages. Housing now consumes a historically high share of household income. Healthcare costs continue to outpace overall spending growth. Education increasingly requires life-long debt simply to participate in the labor market. In rural communities, transportation has become an often insurmountable expense. Childcare has become altogether cost-prohibitive for many working families.

When fixed costs rise relentlessly while wages inch upward, households lose flexibility. They may not have lower wages, but they are poorer in practice. And they will become poorer over time due to the lack of wealth-building built into their economic lives.

The erosion of margin produces a second, more dangerous effect: fragility. A large share of U.S. households report that they could not cover a modest emergency expense without borrowing, selling assets, or missing payments. This is not just for “poor people.” This vulnerability extends well into the middle class. Resilience, not income, is what determines long-term stability. When households lack slack, every disruption becomes a crisis.

These economic pressures exist everywhere, but they are magnified in small towns and rural communities. In these economies, there are fewer job alternatives, longer travel distances, less wage diversity, smaller housing markets, and fewer institutional buffers. When systems fail, there is little redundancy.

Getting poorer, in this context, means losing agency, resilience, and optionality. It’s not about wages, it’s about stability and wealth building over time.

Extractive vs. Circulatory Economics

Most communities are not stagnant. They are busy. Construction is happening. Employers are hiring. Visitors come and go. Yet activity alone does not determine whether a place becomes more resilient or more fragile. An economy is extractive when value created locally leaves the system faster than it recirculates, even when economic activity appears healthy. This is increasingly a structural outcome of our current national economy.

Extractive systems emerge from ordinary, normalized structures: shareholder ownership, financial consolidation, platform intermediation, housing treated as an asset class, and incentive frameworks that reward scale over place. Together, these systems form an economy that pulls wealth out of small towns and rural communities and sends it to distant shareholders. Growth, under these conditions, often accelerates loss by increasing the volume of wealth that leaks away. This is why communities can look busy while their population becomes poorer.

Extractive economics is present in most of our daily economic systems like housing, healthcare, childcare, food, retail, banking, and education. These systems reveal whether value is compounding locally or leaving quickly. Together, these systems form a structure that consistently transfers wealth out of small towns and rural communities and to the consolidating wealth of Wall Street and the top 10% of wealth holders.

By contrast, circulatory economics keeps wealth in a community where it compounds locally. Circulation does not mean isolation. External capital and trade are essential for any community’s success. The distinction lies in what happens after value enters the system. Where does it go? Does it compound locally or quickly exit the community?

In circulatory systems:

• Ownership is local or member-based.
• Surplus is reinvested nearby.
• Decisions respond to local conditions.
• Time horizons are longer and more strategic for local outcomes.

In such an economic system, growth strengthens resilience rather than increasing fragility. Circulation asks different questions: Who owns the assets? Where does the surplus go? Who decides what happens next? Circulation is not achieved by doing more. It is achieved by changing what happens after value is created, and that requires a shift in how communities define success.

Extractive economic systems are obsessed with attraction. They seek to attract employers, tourists, capital, and talent. Circulatory systems start with retention. They design for the retention of income, ownership, decision-making, people, and wealth. Communities that retain wealth can grow more slowly and become more prosperous. Communities that chase growth without retention become busier and, eventually, poorer as a result.

We must rethink much of what we measure, what we seek, and how we operate. We should still measure job counts, payroll totals, visitor numbers, and capital investment. But these are only process metrics. Our true KPIs should be focused instead on measuring local ownership of assets, reinvestment rates, cost of living alignment, household stability, and local multiplier effects. What gets measured shapes what gets done. Our primary KPI should be the median net wealth (in relation to cost of living) of our existing population. Everything is subservient to that. In other words, are people getting richer or poorer over time?

It’s daunting to think that we have to change our entire national economic system. But, the first step of change is simply identifying what is broken. If we can’t see the extractive nature of our economic system, then we can’t fix it. Communities across the country are not short on ideas. They are busy with plans, programs, incentives, and pilot projects. What they lack is a shared understanding of how wealth flows, who controls it, and what must change for prosperity to compound locally.
Understanding circulatory versus extractive economics is not about generating a list of best practices. It is about clarity first. Then, it’s about redesigning your overall economic system to serve your local population.

Banking

Banking is the quietest and most powerful extraction mechanism in the economy. It determines whether money stays local or leaves. In consolidated, shareholder-owned banking systems:

• Deposits are pooled centrally.
• Lending decisions are driven by portfolio logic.
• Profits are distributed to distant shareholders.
• Local risk is disconnected from local reward.

As banking consolidates, local decision-making erodes. Businesses with strong local fundamentals may struggle to access capital, while speculative or extractive investments are favored due to scale and standardization.

Interest payments, fees, and service charges function as reliable upward transfers of money. These transfers accumulate, pulling value out of communities even when economic activity remains constant. Debt becomes the mechanism through which households and businesses participate in an increasingly extractive economy, committing future income to pay for past consumption, with poorer people paying higher interest rates.

Banking extraction is rarely visible because it is normalized. But it is one of the most consistent drivers of long-term wealth loss for a small town or rural community. Where finance is locally governed or cooperative, this dynamic changes. Where it is not, money behaves like gravity, pulling more money toward itself and away from your community.

A primary role of economic development should be to restructure local finance and banking to payout to local ownership, versus sending everyone’s money away never to return. Communities that ignore finance design outsource their future to the hoses of extraction.

Debt, specifically, is the great destroyer of local economies and personal financial stability. Eliminating high-interest credit card debt, insurmountable student loans, and front-loaded amortization schedules on homes and automobiles should be the primary focus of communities wanting to end out-of-control corporate wealth extraction.

Housing

Housing is often the first place people feel economic pressure because it converts local income into external wealth faster than almost any other system. Homes function as investment vehicles. Rent and mortgage interest flow to absentee owners. Short-term rentals outcompete long-term residents. Scarcity is financially rewarded.

For households, housing absorbs a growing share of income. Local wages no longer translate into local wealth. They instead quickly translate into transfers of wealth through rent payments and monthly mortgage payments with front-loaded amortization schedules (with every payment made being over 50% interest for the first fifteen years of the mortgage). This is why nearly every economic development conversation eventually becomes a housing debate.

Housing should function as shelter first, local wealth-building for homeowners second, and an investment asset class third (and only if there is left over supply). Our systems should prioritize long-term residents and home ownership as wealth building. We should work to reduce speculative pressure, align housing costs with local wages, and treat workforce housing as economic infrastructure.

These are not unrealistic goals. We just don’t currently design for them. For example, we could incentivize investors to build or fix-up housing, and then heavily incentivize them to sell those houses to the occupants. We could use both positive incentives, such as waiving capital gains tax on properties sold to occupants, and negative incentives, like increasing property taxes to 20% after years of remote property ownership (discouraging remote landlordship all together). Without housing stability, no other economic strategy can take hold.

Healthcare

Healthcare has been all over the news for a while now and is rapidly becoming an enormous cost issue. In the U.S., healthcare is characterized by centralized ownership, pricing, and decision-making. Even when care is delivered locally, financial control often resides elsewhere. Costs rise faster than wages, while households and employers absorb increasing premiums, deductibles, and out-of-pocket expenses. Public systems quietly absorb uncompensated care, and local governments subsidize instability indirectly. Healthcare dollars leave communities quickly without building much local wealth. And as more people are simply priced out of having healthcare, the toll on our population is enormous.

The United States is the only wealthy, industrialized country within the OECD (Organisation for Economic Co-operation and Development) that does not provide universal health coverage for its citizens. In other developed nations of the world, healthcare is treated as economic infrastructure. In the United States, it is treated as a benefit, a commodity, or a personal risk. That structural choice has consequences.

Universal healthcare systems (whether single-payer, multi-payer, or hybrid) produce consistent economic outcomes: lower total healthcare spending, higher labor force participation, reduced burden on employers, and greater household financial stability. The United States spends roughly twice as much per person on healthcare as the average developed nation, while achieving no corresponding advantage in outcomes.

In the U.S., healthcare functions as a structural tax on labor, entrepreneurship, and local resilience. Universal healthcare is not a silver bullet. But economically, it is one of the highest-return stability investments a society can make.

Childcare

Childcare is one of the least visible yet most structurally important components of a local economy. It determines who can work, how much they can earn, and whether families can remain in a community at all. Yet it is rarely treated as economic infrastructure. In practice, childcare functions as a toll for participation in the labor market.

For working families, childcare costs often rival housing costs as a share of income. In many regions, center-based childcare consumes 20 to 35 percent of household earnings. In rural communities, the challenge is compounded by scarcity: fewer providers, longer travel distances, staffing shortages, and thin margins.

From a household perspective, wages earned are immediately transferred out to cover childcare costs, leaving little margin. From a community perspective, labor supply shrinks, not because people are unwilling to work, but because participation has become economically irrational due to childcare costs.

Childcare workers are among the lowest-paid occupations in the country, and providers operate on razor-thin margins. As a result, programs close, enrollment is capped, and families rely on unstable arrangements.

This helps explain a common paradox in small cities and rural communities in the U.S.: employers report labor shortages even when jobs are available. The jobs exist. The workers exist. But the infrastructure that makes work possible does not.
Childcare is not successful as a private market. It is not economically feasible as a social service. It should instead be considered labor-market participation infrastructure. Childcare is an economic multiplier, and that takes public investment. If childcare was universally provided with quality professionals and quality programs, think of the impact it would have on a community over twenty years.

Education

Education is commonly framed as the solution to economic insecurity. But structurally, it has become one of its accelerants. Education costs have risen far faster than inflation, shifting the burden of workforce preparation from public investment to individual debt.

Communities export young people to obtain credentials and import debt that limits return. Education becomes a value-export system rather than a local wealth-building pathway, and it puts individuals deep into debt before they ever start earning a livable wage, guaranteeing that a good portion of that wage will be shipped off elsewhere in the form of interest and repayment.

By contrast, investing in public education creates a stronger local workforce while serving as an economic recruiter and multiplier for the community.

Retail

Retail is one of the most misunderstood components of local economies because it looks healthy even when it is deeply extractive. From the outside, retail activity signals vitality: stores are open, shelves are stocked, transactions are constant. But retail’s economic impact is not determined by volume of spending. It is determined by where the money goes after the sale.

In extractive retail systems ownership is external, profits are consolidated and distributed elsewhere, and local reinvestment is minimal. As retail consolidates into national chains, franchises, and e-commerce platforms, communities increasingly function as points of extraction, not hubs of wealth creation. Dollars arrive in the form of wages, then exit quickly. From a macro-economic perspective, corporate-owned retail stores and fast-food chains are little more than outposts for wealth extraction from our nation’s communities.

This dynamic is especially pronounced in small towns and rural communities, where the loss of locally owned retail removes ownership pathways, middle-income jobs, and business succession opportunities. Local spending does not disappear. Local wealth retention does.

Tourism

Tourism is often treated as an economic development strategy because it brings outside money into a community. In the short term, this is true. In the long term, tourism frequently becomes one of the most extractive sectors in a local economy.

The reason is structural. In extractive tourism systems:

• Lodging and attractions are absentee-owned.
• Booking platforms capture significant margins.
• Jobs are seasonal and low-wage.
• Housing shifts from residents to visitors.
• Infrastructure costs remain local.

While visitor spending flows in, much of the surplus flows out. To be clear, tourism is not inherently bad. Tourism is a great way to bring money into a community, but we often miss how it ultimately serves to transfer wealth out of one. Communities absorb the wear and tear on roads, utilities, public safety, housing, and services while retaining only a fraction of the wealth created. Housing costs go up, while wages go down (food service and retail have some of the lowest wages out there). This creates a dangerous illusion. Tourism-heavy communities can appear prosperous because money is moving, yet residents experience rising costs, housing displacement, and declining stability. Tourism becomes extractive when volume replaces retention as the primary goal.

Tourism can support circulation when ownership remains local, when housing is protected, and when visitor dollars fund community infrastructure. Volume without retention accelerates extraction.

Food

Local agriculture and food systems reveal extractive versus circulatory structure very clearly. When production, processing, distribution, and retail remain local, food dollars recur weekly and compound locally. When ownership and processing are centralized, rural communities surrounded by farmland become food deserts. The rise of Dollar General is not an anomaly. It is a structural outcome of extraction.

Food systems can be among the most powerful circulatory economic engines. Circulatory food strategies focus on local processing and distribution, cooperative ownership, regional food hubs, farm-to-institution purchasing, and locally owned grocery stores. The goal is not self-sufficiency. The goal is retention of wealth.

Most rural communities still list agriculture as their largest industry, yet half the county may be a food desert. This is a sad state of affairs. Communities that grow food but cannot feed themselves are exporting value at the most basic level.

Conclusion

Extractive economic systems function exactly as designed. They are efficient, scalable, and rewarded. But they are quietly killing the economies of the small towns and rural communities all over the nation. Economists see what they call the “K” economy and say they don’t understand it. But the answer is simple. The economy is extractive. It pulls wealth from middle and low income people and transfers it to wealthy people. That is where their wealth comes from. If Dollar General shows increased profit earnings, boosting investment portfolios and driving up the stock market, then most of the people in your county are poorer as a result. These are not just correlated. They are causal. Even our monetary system itself, due to inflation, transfers money from lower income people (who have only depreciating cash holdings) to higher income people (who own appreciating assets).

Circulatory systems must be chosen, designed, and defended. Prosperity does not begin with growth. It begins with local ownership, local retention, local circulation, and local compounding of wealth. Communities do not become successful by doing more or building more or selling more of their natural resources. They become successful by keeping more of what they create.

Shifting to a circulatory economy will not happen on its own or overnight. Such a shift must be created intentionally through governance, capital, and sequencing. A new kind of leadership is required. Not a louder vision. Not faster action. But structural redesign.

We must change our understanding of the economy that we are in. We must change our understanding of what constitutes a win. We must say no to extractive “wins” that make local people poorer over the long term. This is difficult work because it resists short political timelines and familiar metrics. But it is the only work that compounds wealth locally and will create the success that we need. We must create this change, this shift in our national and local economies, if we seek to be wealthier and not poorer over time. The alternative to change is bleak.

You can start your community’s journey to positive economic change simply by measuring if people are getting richer over time or poorer over time (in a practical, lived sense). Pay close attention to how wealth moves into, around, and out of your community. Seek to understand the extractive nature of our economy and how to keep and compound wealth locally. This is the pathway to a new, better, and more democratic economy. The path to a brighter future for all.