I agree with your point on the need for a diversified and innovative economy, with a focus on local small businesses. However, I think the bigger question is how do we achieve such an economic model?

By my estimation the problem is that the current social welfare system is overly complex and costly to operate this = reduced return on the investment. 

One way or another, this investment has to be made. If you run a small shoe store, your annual sales are directly linked to the capacity of people to buy your shoes. If I'm on a part-time, short-term contract because the shoe factory was exported to Indonesia (or taken by a robot), I'm not going to spend much money on new shoes, or on other discretionary spending for that matter. Your shoe store won't be able to compete with the big box retailer, and everyone loses but the big guys.

The alternative involves consumers entering extreme debt just to stay afloat, which leads to economic uncertainty... your shoe store tanks here, too.