Imagine yourself living out west in the early 1800s in, say, what is today Illinois. You farm, produce food and other goods for your own use and to sell to your neighbors. They do the same thing as well. Money isn’t a central theme in anyone’s life where you are, though after the debacle of the War of 1812, the importance of a strong monetary policy (to finance major things like war) is foremost in the minds of the politicians and so the political camps headed on the one hand by the Federalist followers of Adams and on the other by Jeffersonian Democratic Republicans are going at it hammer and tongs over the need for a central Bank of the United States.
That argument, like European luxury items, however, is very far away from your reality. You live in a kind of barter economy. Collin helps Grant bring in his harvest and Grant helps Collin raise a barn: A day’s labor for a day’s labor. Katherine makes splendid candles and she can trade them for Michael’s leather goods. Even if actual money (paper money—cash—or precious metal coin called specie) is needed, loans are made face-to-face and among friends with little or no thought to interest and repayment based, not on a timetable of payments, but on the borrower’s ability to repay.
Boy! Times have changed. Over the ensuing two centuries, barter was replaced by money-based commerce; banks grew in number and influence until the bank loan became the way people borrowed money; and foreign goods went from being luxury items usually brought home by travelers to everyday staple items found in every American home. Consider the recent issues with Chinese manufactured goods at certain big-box retailers. They are not the first, in the 1960s and 1970s, the Japanese were flooding the American market with cheap electronics. Just as “Made in China” is a sign of something cheaply made (and possibly dangerous), back then it was “Made in Japan.” Now, if you don’t have a Japanese car, you probably have a Japanese stereo or TV or computer. This is just one example of products from all over the world that have taken the place of domestic products because Americans are always looking for the bargain price and decent return on investment that these foreign products offer.
Well, maybe not. The “Buy American” movement, which has always been an undercurrent of resistance to foreign products, seems to have developed some new life recently. The Hartmann Group, in its report, Consumer Understanding of Buying Local, observes that Like organic products in the late 1990’s, the fervor for all things “local,” ranging from farm stand goods to civic involvement, seems to be everywhere today. On the surface, the rising interest among consumers in local products might be misconstrued as a growing fascination with fresh produce culled from the explosive growth of farmers markets in the U.S. To be sure, fresh agricultural goods and romanticized notions of family farms are a key part of what make up local products in the minds of consumers, yet consumers are also avidly interested in supporting local businesses and producers that they believe reflect their community’s values.
Because “Local” is fast becoming a quality distinction—it began with locally grown foods and spread from there as part of the greening of American culture—many consumers are more willing to spend a little more and go a little more out of their way to support local businesses.
This is great news for small business and the communities that support them. In a 2003 study by The Institute for Local Self-Reliance called The Economic Impact of Locally Owned Businesses vs. Chains: A Case Study in Midcoast Maine, researchers asked, if a local store makes a $100 sale, what happens to that $100? They also asked the same question about a $100 spent in a big-box retailer. The results were as follows:
We found that the eight businesses spent 44.6 percent of their revenue within the surrounding two counties (Knox and Waldo). Another 8.7 percent was spent elsewhere in the state of Maine. This in-state spending included: wages and benefits paid to local employees (28.1 percent of total revenue); inventory, supplies, and services from other local businesses (16.9 percent); profits that accrued to local owners (5.4 percent); taxes paid to local and state government (2.4 percent); and contributions made to local charities (0.4 percent).
In terms of sourcing inventory, supplies, and services, we found that the eight local businesses are supporting a variety of other local businesses. All eight bank with locally owned banks. They purchase inventory from local manufacturers, advertise in local newspapers, and hire local accountants, printers, internet service providers, and repair people.
The remainder of the local businesses' revenue (46.7 percent) left the state. This out-of-state spending includes inventory purchased from out-of-state companies, mortgage interest, rent, credit card fees, supplies, insurance, and equipment leasing.
The big-box retailer, on the other hand, had a much different way of spending the money it brought in. The researchers had to base their figures here on published material from a number of sources because the big-box retailers rarely, if ever, provide detailed financial information. That said, this is what the researchers came up with:
Based on our estimate, a typical big box store spends 14.1 percent of its revenue within the local and state economy, mostly in the form of payroll. The rest leaves the state, flowing to out-of-state suppliers or back to corporate headquarters.
We also compared the charitable contributions made by the local businesses in our study with two major chains, Target and Wal-Mart, which publish data on their charitable giving. The eight local businesses made $24,000 in cash donations to charities in 2002, or 0.4 percent of their total revenue. That's more than four times as much, relative to overall sales, as Wal-mart gave in 2002, and twice as much as Target gave.
In other words, buying local means keeping the wealth local. It stays in the hands of other small businesses, of local people on local payrolls, in local government and so on. This isn’t limited to the coast of Maine, either. Similar findings came out in the 2007 San Francisco Retail Diversity Study, which concluded that:
The independent merchants of San Francisco provide the community with a tremendous injection of economic activity. In this analysis, we focused on the positive: increasing independent market share by 10% would yield nearly $200 Million in economic activity and nearly 1,300 new jobs. However, it must be remembered that the reverse is also true: shifting a further 10% of sales to chain merchants would deprive the community of that same $200 Million and put those 1,300 employees out of work.
Though time and funding did not permit a study of market shares over time, there can be little doubt that chain merchants have been garnering increasing market share over the last two decades, in San Francisco as in the rest of the country. No complex analysis is required to recognize that a continuation of this trend would, over some period of time, cost the city millions in economic activity and hundreds of jobs.
There is little doubt that big-box retailers cost jobs and aggravate poverty. In a study called “Wal-Mart and County-wide Poverty,” published in the June, 2006 Social Science Quarterly, Stephan J. Goetz of Pennsylvania State University and Hema Swaminathan, with the International Center for Research on Women, found that:
After controlling for other factors determining changes in the poverty rate over time, we find that counties with more initial (1987) Wal-Mart stores and counties with more additions of stores between 1987 and 1998 experienced greater increases (or smaller decreases) in family-poverty rates during the 1990s economic boom period. They concluded that: Wal-Mart creates both benefits and costs to communities in which the chain locates. These benefits and costs need to be weighed carefully by community decision makers in deciding whether to provide public subsidies to the chain.
The point of all of this is that local small business supports local society with a greater reliance on local suppliers. That means a greater reliance on your products and services by others in your community. More jobs, more prosperity, and all of it in your own backyard. All it takes is some community awareness and some hard work.
One example of success in this area is the Think Local First program in Bellingham Washington A comprehensive community poll, and a survey of business participants, were both conducted by Applied Research Northwest, (ARN), an independent Whatcom research firm. The study found that local residents are not only aware of this program and its “Think Local, Buy Local, Be Local” and “Think Local, Buy FRESH, Be Local” logos, but are making significant changes in their purchasing behavior because of it. Dr. Pamela Jull, the lead researcher, said, “Actually, these results are phenomenal. Normally, if 1 in 5 households claim familiarity with your program, and change their behavior because of it you would consider it a success. To have nearly 3 in 5 households attributing a behavior change to this program shows an amazing impact.” The research, which was conducted in 2006, shows that 58% of Bellingham residents make a deliberate choice to buy local. Since then, the campaign, which was started by Sustainable Connections, has come up with a how-to kit and many communities across the country have begun to follow their lead. The effect on communities is dramatic, as is the effect these programs have on the businesses themselves.
Sustainable Connections executive director, Michelle Long, said she was most pleased to see that since participating, 67% of the businesses have become better community stewards by adopting specific new business practices that lessen their environmental impact and strengthen community. “This kind of reciprocity is our goal. We work with the owners of our local businesses to help them in their stewardship and innovation toward green building, renewable energy, sustainable agriculture, and more. In turn we ask the community to support our locally owned businesses.”
Just the way it was 200 years ago, local business working with local business, local people helping local people is coming back and with it a market of people for whom buying local is important. Look around and see what is happening in your community. You might just find that it is time for you and your neighbors to begin to Think Locally.