Tredmond@sfbg.com

The first time the Guardian made an issue of the role small businesses play in the local economy, official San Francisco freaked out.

It was 1985, and only a handful of people were talking about sustainable local economies, about the connection between environmentalism and community-based economics, about how malls and chains stores were ruining America, and how spending money locally would create more jobs, with less waste of energy, than shopping at Wal-Mart or Home Depot.

The Guardian hired MIT economist David Birch to produce a study on job generation in San Francisco. His conclusion: small, locally-owned, independent businesses generated the vast majority of jobs in San Francisco. That directly contradicted the fundamental thesis driving city planning at the time; the planners and the mayor (Dianne Feinstein) argued that high-rise office development was the city's prime source of new jobs.

The day the study came out, the city planning director (Dean Macris) called in his senior staff and directed them to work all weekend poring over our study and trying to figure out how to discredit it. Feinstein ignored us. The supervisors continued to allow high-rises to sprout, damaging small business and the local economy. The Chamber of Commerce was so disdainful of small business that a group of Fisherman's Wharf merchants quit in disgust.

Today that battle is over. Done. The argument isn't even an argument anymore. Everyone, from Mayor Gavin Newsom and the Chamber on down, agrees that locally-owned businesses are the lifeblood of the San Francisco economy. The mayor goes around urging people to "shop local."

But as we suggest in this special issue on San Francisco small business, the city itself isn't doing such a great job at that. In fact, the public sector in general has been trained for so long to do business with the lowest bidder that the role a major institution like the city and county of San Francisco can play in boosting the local economy has gotten lost.

A 2007 study sponsored by the San Francisco Locally Owned Merchants Alliance shows that if local residents shifted just 10 percent of their purchases from big chains to local businesses, the city's economy would pick up $200 million and 1,300 new jobs a year. Imagine if City Hall, BART, state agencies, the school district — every public sector agency in this city — did the same. *