Choosing Local Businesses

by Philip Brewer on 23 November 2010 (5 comments)

Market forces don't trump everything, but they trump a lot. When the big-box stores have everything you want and at a better price, it takes a certain kind of quixotic determination to shop local businesses instead.

Plenty of people have that quixotic determination in some measure and do shop at local businesses. And there are plenty of good reasons to do so:

  • Local stores are usually closer (rather than out at the edge of town).
     
  • Local stores are likely to have a selection that reflects the tastes of the local community (rather than whatever the corporate buyers think will make highest profit nationwide).
     
  • Local stores are much more likely to be environmentally friendly than the globalized producers. (After all, any environmental harm they cause affects their customers — and happens where their customers can see it.)
     
  • The people running the local store are much more likely than some minimum-wage big-box drone to care about how well your purchase works out for you.
     
  • Money paid at a local store is much more likely to stay local.

This last point, which is key, is not a new issue. People have understood the problem of money flowing out of the community for as long as there has been money.

The Problem with Global Money

This issue has, for at least hundreds of years, been especially acute in farming communities, because farmers get all the money they're going to get at harvest time. For a little while after the harvest, the local economy would thrive, thanks to vigorous flows of money from farmer to shop to local craftsman and back again. The seamstress would buy from the weaver, who'd buy from the spinner, who'd buy from the shepherd, who'd shop at the local store that sold the seamstress's wares.

But this only worked for a little while. Some things couldn't be sourced locally. The blacksmith had to buy iron. The glazer had to buy glass. One coin at a time, money flowed out of the community — and, since it was a farming community, there would be few coins flowing back again until the next harvest. Pretty soon there was no longer enough cash to support a vibrant local economy. With everyone hoarding their last few coins, local business could easily devolve to barter.

The same dynamic is at work today. It hits less sharply because there are more inflows of cash — even in farming communities there are plenty of people whose income isn't purely from the harvest — but the outflow of cash still exists. Some of the money spent at the big-box store goes to pay the local workers and some goes to pay local taxes and local utilities, but that's it. The rest of the money leaves the community. Some goes to pay the global firms that manufacture the products. The rest goes to Wall Street to pay the shareholders. A small trickle flows back — some of those shareholders are local rich folks and some are pension funds paying pensions to local retired folks — but that tiny trickle hardly reverses the flood.

Winning the Local-Shopping Argument

Even with all that on the side of shopping locally, most people look at both sides and end up shopping the big-box stores (and on the internet). It's tempting to imagine that, if the issues could just be explained clearly enough, shoppers would make a different choice, but I doubt that's true. In the end, getting the best price is simply more important than anything else.

And right there is our best shot at winning the argument. The winning strategy now — a win not only on cost, but also on sustainability and environmental grounds — is to buy local but to include buying used, salvaged, recycled, and free goods.

This strategy supports not only the local storefront businesses, which can include such goods among their items on sale, but it also supports the non-storefront businesses such as local craftspeople (which can make much better use of recycled and salvaged materials than globalized businesses can, if for no other reason than that the materials are already there and don't need to be shipped). Further, it integrates ordinary folks back into the local economy as sellers, not merely consumers.

Shop at local businesses. Take advantage of their superior service and their superior knowledge of the tastes of the local community. Buy goods produced locally. Enjoy the fact that their production neither destroyed the environment (not even in some far-away place) nor depended on slave labor. Most especially, buy things used from your friends and neighbors. Know that your money is staying in your local community.

Small Business Saturday

 

This small business post is brought to you by American Express. American Express is presenting Small Business Saturday, a way to honor the local merchants who are the backbone of the economy, this Saturday, November 27. They're offering statement credits to people who shop at small businesses, advertising for small-business owners, and donations to Girls Inc. for "Likes" of the Small Business Saturday page on Facebook. Join the celebration by clicking the "Like" button and then visiting the Facebook page to learn more about the program and read the terms and conditions that apply.

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Guest's picture
Guest

Using your farming community example, where does the money that farmers get at harvest come from? That's right, from outside the community. If one strictly followed the "buy local" mantra, farmers wouldn't have that initial inflow because those outside consumers wouldn't be buying from them. In fact, there would be no need for exporters because everyone, everywhere would be buying local.

I could grow my own food and make my own clothes, but it is more efficient for me to do what I do best and then trade for those things (I get more of them and have more time to do things like read blog posts from people outside of my community). That logic scales not just to a community level but on a global scale. It's more efficient for people in Iowa to grow corn and trade it with Japanese workers who make cars and electronics. Both groups of people are better off than if they "traded local."

Guest's picture
Guest

I completely agree! If local industry would like my dollar, especially at the premiums they typically are, they need to provide an added benefit.

For instance, there's this deli that not only has the best Rubens but the vibe of the place can't be met at a Einstein's Bagel or Kroger Deli. So occasionally I pay $10 for a Ruben I could make at home for $5.50 because there is a perceived added value. (They are big sandwiches.)

However lets not kid ourselves, if mom and pop stores and/or farms paid their workers over minimum wage (if not under the table), gave benefits, and/or contributed to the community they would have more of a leg to stand on.

Also let's not forget, most of our paychecks are earn from contributions nationally, or even internationally with business. For me to turn my back on my neighbors in Michigan who are paying my electric this month, because I have to buy only Ohio apples... well is silly.

Philip Brewer's picture

In cities, there's usually a more balanced flow—money flows out steadily, but it also flows in steadily, so you don't see the persistent drain of cash that follows the brief surge that a farming town sees.

You're absolutely right that specialization raises your standard of living. But it also makes your home economy and your local community's economy more brittle. (The closing of one major employer can devastate whole towns.)

I talk a bit more about the trade-offs involved in an article here on Wise Bread called Self-Sufficiency, Self-Reliance, and Freedom

I certainly don't press anyone to go for total self-sufficiency, and I don't do it myself. But a bit of strategic partial self-sufficiency makes for more secure households and more secure communities.

Guest's picture
Guest

I completely agree! If local industry would like my dollar, especially at the premiums they typically are, they need to provide an added benefit.

For instance, there's this deli that not only has the best Rubens but the vibe of the place can't be met at a Einstein's Bagel or Kroger Deli. So occasionally I pay $10 for a Ruben I could make at home for $5.50 because there is a perceived added value. (They are big sandwiches.)

However lets not kid ourselves, if mom and pop stores and/or farms paid their workers over minimum wage (if not under the table), gave benefits, and/or contributed to the community they would have more of a leg to stand on.

Also let's not forget, most of our paychecks are earn from contributions nationally, or even internationally with business. For me to turn my back on my neighbors in Michigan who are paying my electric this month, because I have to buy only Ohio apples... well is silly.

Guest's picture

I'm more than glad to patronize locally owned businesses, but the bottom line is that I shop where I'm going to get the best price, selection, and service. On the one hand I buy a lot of groceries and related household items at Sam's because their prices are hard to beat. On the other hand by far the best appliance store is locally owned and I go out of my way to buy appliances and electronics there. I'm a small business person and I want to see other local small business people succeed. However, nobody is cutting me any sort of break because I am small and local, they retain my services because they feel that I am qualified to meet their financial advice needs. Likewise as a consumer I am going to shop where my needs are best met whether that retailer is a national chain or a locally owned business.