September 2006

So, my challenge to Marc is this: When price, quality, and convenience are roughly equal, why would you ever want to buy nonlocal? Here are ten reasons that persuade me – and a growing number of Americans – to localize spending.

(1) Higher Standards – The most fundamental difference between local and nonlocal businesses is that the former stick around while the latter entertain plans for moving to Mexico or Malaysia. Consequently, any community seeking sustainability through nonlocal businesses cannot, in the final analysis, possibly do so, because those businesses are continually fighting off tougher environmental standards. A good example of this is in my backyard, Maryland. Regulation of the chicken industry has been virtually impossible because the producers, Tyson and Perdue, and continually threatening to move to environmentally “loose” jurisdictions like Arkansas and Mississippi. This same problem also afflicts economic development that seeks higher wages through nonlocal industry. Yes, they often pay better, but they often leave and take those jobs with them.

(2) Greater Wealth – Because nonlocal businesses come and go while local businesses stick around for years, often for many generations, they are much more reliable generators of wealth, income, and jobs. Around the country, economic developers have been snookered into offering millions of dollars of incentives to attract or retain nonlocal business, and by and large these deals have been huge losers. Not because these industries didn’t have great performance on paper, including the promise of high wages. But because they stayed for a couple of years, took the incentives, and then vanished. There are some 300 empty Wal-Marts for example across the country – each continuing to cause nasty environmental problems – that stand as testaments to the short-sightedness of economic developers who thought they could lure the box stores for more than a heartbeat. The comings and goings of the supposedly high quality jobs turn out to be a very poor bargain for public expenditures on economic development. According to an investigative report about the cost effectiveness of tax abatements in Lane County, Oregon, the cost to the community in lost taxes was about $23,800 per job for nonlocal firms and $2,100 per job for the local firms. The nonlocal jobs were more than ten times more expensive, because the absentee-owned firms were so unreliable. On a net jobs basis (after the big departures), nonlocal jobs were 33 times more expensive.

(3) Greater Stability – The comings and goings of large, nonlocal business create enormous stresses, especially on small community’s economy. In the Katahdin Region of Maine, where I’ve been working over the past few years, the shutdown of a paper mill, so that it could move operations to a lower-wage area, created a regional unemployment rate of 40% over the next year. That kind of economic catastrophe is far less likely in a community economy built primarily around local businesses.

(4) Greater Multipliers – There’s a growing body of evidence that local businesses contribute more to local multipliers – the most fundamental basis for community income, wealth, and jobs. A Civic Economics study in Austin, Texas, for example, found that for every $100 spent at a Borders bookstore, $13 remained in the local economy. For every $100 spent at a local bookstore, $45 remained. Roughly speaking, then, the local expenditure contributed to three times the economic benefits as the nonlocal expenditure. A dozen similar studies have been done worldwide, and they all point in the same direction.

(5) Less Vulnerability – A local economy that is more self-reliant will be more immune to global surprises totally outside its control. The obvious example right now is importation of oil, which most observers link with terrorism and economic instability and which could be eliminated through smart, cost effective development of local energy efficiency and renewable resources over the next generation. Importing food leaves you vulnerable to imported pollution, micro-organisms, and pests from less responsible farmers elsewhere in the world.

(6) Smart Growth – Local small business is a natural promoter of “smart growth” or anti-sprawl policies. Smart growth means redesigning a community so that residents can walk or ride bikes from home to school, from work to the grocery store. It means scrapping old zoning laws and promoting multiple uses—residential, commercial, clean industrial, educational, civic—in existing spaces, because it’s better to fully use the town center than to build subdivisions on green spaces on the periphery. Because local businesses tend to be small, they can fit more easily inside homes or on the ground floor of residences. Because they focus primarily on local markets, local businesses place a high premium on being easily accessible by local residents.

(7) Greater Identity – Part of what makes any community great is how well it preserves its unique culture, foods, ecology, architecture, history, music, and art. Local businesses celebrate these features, while nonlocals steamroll them with retail monocultures. Austin’s small business network employs the slogan “Keep Austin Weird.” Outsider-owned firms take what they can from local assets and move on. It’s the homegrown entrepreneurs whose time horizon extends even beyond their grandchildren and who truly care about preserving these assets. And it’s the local firms who are most inclined to serve local tastes with specific microbrews and clothing lines. “Weirdness” is what attracts tourists, engages locals in their culture, draws talented newcomers, and keeps young people hanging around.

(8) Greater Creativity – Richard Florida’s arguments about the importance of a “creative class” for economic success also tend to support locally owned businesses. Florida argues that among the key inducements for a creative class to move to and stay in a community are its civic culture, its intellectual bent, its diversity, and its sense of self—all attributes that are clearly enhanced in a local-business economy. A local-business economy seeks to celebrate its own culture, not import mass culture through boring chain restaurants and Cineplexes. It seeks to have more residents engaged as entrepreneurs and fewer as worker bees for a Honda plant. Myriad ideas and elements of a culture can best emerge through myriad homegrown enterprises.

(9) Greater Social Well Being – In 1946 two noted social scientists, C. Wright Mills and Melville Ulmer, compared communities dominated by at least one large manufacturer versus those with many small businesses. They found that small business communities “provided for their residents a considerably more balanced economic life than did big business cities” and that “the general level of civic welfare was appreciably higher.” Thomas Lyson, a professor of rural sociology at Cornell University, updated this study by looking at 226 manufacturing-dependent counties in the United States. He concluded that these communities are “vulnerable to greater inequality, lower levels of welfare, and increased rates of social disruption than localities where the economy is more diversified.”

(10) Greater Political Participation – Studies of voting behavior suggest that the longer residents live in a community, the more likely they are to vote, and that economically diverse communities have higher participation rates in local politics. Moreover, Harvard political scientist Robert Putnam has identified the long-term relationships in stable communities as facilitating the kinds of civic institutions—schools, churches, charities, fraternal leagues, business clubs—that are essential for economic success. As one group of scholars recently concluded after reviewing the social science literature: “[T]he degree to which the economic underpinnings of local communities can be stabilized—or not—will be inextricably linked with the quality of American democracy in the coming century.” An economy with many long-term homegrown businesses is more likely to contribute to such stability than the boom-and-bust economy created by place-hopping corporations.
Of course, things like price, quality, and convenience are not always equal. That’s why I embrace a philosophy of “local first,” not local at all costs. Sure, we’ll all still buy some things from chain stores – I too am drinking a Starbucks coffee right now at the Portland, Maine, airport (because of the absence of an equal local alternative here). But the experience of more than 60 communities that now have “local first” campaigns is striking. More information, more questions, more thinking almost always leads consumers to localize more of their spending. Nearly all the information we have about the supposedly great bargains of chain businesses is from their advertising, and better information about what’s available locally tends to highlight cost-effective ways to save money and go local.

As I argue in “The Small-Mart Revolution,” this is not an academic exercise. It goes to heart of preserving the communities we care about.

Best, Michael Shuman
shuman@igc.org
www.smallmart.org