If everyone in the nation bought nothing but local products and shopped nowhere but at small, locally owned stores, would the nation’s economy improve?
As ridiculous as that question is, it is the premise behind a study by a group called Civic Economics that was touted this week in Salt Lake City. (Read a news story on it here.)
Independent local businesses “return” 382 percent more local dollars to the economy than those evil chain establishments, and local restaurants bring back 79 percent of the money they bring in, compared to 30 percent for the ones that are part of chains.
Of course, neither figures takes into account the Internet, which often provides the cheapest route to quality merchandise. You can’t eat out online, but you can get just about anything else that way.
And you can quickly find out which restaurant, locally owned or otherwise, offers the best food at the best price.
And isn’t that really what commerce is all about?
Economic illiteracy abounds. In this case, the principle of comparative advantage would be a good one to study. (Click here for a good essay explaining how it works.) It’s the reason protectionism doesn’t work.
People in one place can produce something comparatively better than people in another place. Through trade, consumers in both places benefit.
Look at it this way: My wife and I decided long ago that if we were to make our own clothes or raise our own chickens for eggs, it would be only because we derive some unrivaled pleasure from doing so. We don’t. Doing these things certainly wouldn’t save us money. We can buy those items for much less than it would cost us in time, materials, labor, feed and various frustrations to produce them ourselves, and we can buy them at better quality. Others have learned how to produce these things efficiently, and they do it in a volume that greatly reduces costs.
If I buy an item from a local store that is more expensive than it would be from a chain, I am rewarding wasteful practices and actually keeping myself from spending elsewhere the money I would save.
And if I refuse to buy from Walmart, believing the money would go to Arkansas or some other corporate center, I would have to expect people in those places to not buy products made here.
A couple of professors, Jayson L. Lusk and F. Bailey Norwood, explain it better than I can in their essay, “The Locavore’s Dilemma: Why Pineapples Shouldn’t Be Grown in North Dakota.”
I recommend reading the entire thing. Even though it concerns locally grown food only, it applies broadly to all buy-local movements.
Among other things, they say, “… a shopper involved in the global food chain is part of a much larger community—one that requires a great deal more trust than one is required to muster at the farmers’ market. If we want to foster the civic virtues of trust, trustworthiness, and community, the local-food movement is a move in the wrong direction—it is little more than nativism.”
Early Utah pioneers, as resourceful as they were, couldn’t really build a thriving self-contained economy. But their leaders understood they had to spread far and wide across a large geographic area to try to create as many comparative advantage situations as possible. When the railroad came along, the economies of far-flung Western towns along those routes improved rapidly.
Buying local isn’t necessarily bad. I do it, but only if it meets my needs.