The Golden Rule of Localism

Over the holiday season, while millions of dollars pour into the retail sector, the Buy local movement encourages shoppers to keep their dollars in their communities. However, in the mainstream media, and on social media, there are some who argue against this strategy. We're celebrating the season by resharing this article by our program director, Nicole Chaland and instructor, Michael Shuman, written in response to a piece published in Report on Business, The Globe and Mail, January 31, 2014.

In his opinion piece,‘Buy Local’: Nice idea, but does it make sense?, Todd Hirsch of ATB Financial claims that it doesn’t.

Hirsch argues that buying local “can lead to poor choices and a misallocation of resources.” 

However, if local goods and services really were, as Hirsh claims, poorer value propositions, efforts to encourage people to buy local would backfire.  Once consumers saw how poor the local alternatives were, they would move away from them.  In fact, it’s significant that Buy Local campaigns consistently have the opposite effect.

One reason is that most local businesses have meager advertising budgets.  Once motivated consumers understand what’s available locally, they are often surprised by the great deals they’ve overlooked. 

For example, Canadian households spend two-thirds of their money on services, not goods.  They quickly can discover that most local service providers easily beat global competitors. 

Most of the remaining goods purchased by households are “nondurables” like food, paper goods, and building materials, all of which weigh a lot compared their value.  That means they are especially vulnerable to rising energy prices.  One reason for the astonishing rise of local food is the growing competitiveness of avoiding nonlocal foods freighted with thousands of miles of expensive transport,

The other reason consumers are attracted to local goods and services is a growing awareness that buying local boosts the economy.  More than two dozen studies have shown every dollar spent at a locally owned business generated two to four times the jobs, income, wealth, taxes, and charitable contributions of comparable nonlocal businesses.  Not a single study has shown otherwise. 

A study done a year ago in British Columbia found that if consumers shifted just 10per cent of their spending from non-local to local businesses it would produce 31,000 jobs. A September 2013 analysis of county patterns in the United States, by the Federal Reserve Bank of Atlanta, showed that a larger presence of small, locally-owned firms means more income and less poverty.

Other studies comparing the differences between towns with many small, locally-owned businesses and towns with mostly non-local businesses are equally compelling.  In a town with lots of locally-owned businesses, you and your neighbours are more likely to vote, to volunteer, to read more newspapers, to take care of public infrastructure, and to have lower rates of obesity and diabetes.  In fact, towns and neighbourhoods with a great degree of local-ownership fare better on 30 measures of well-being.

Hirsh claims that when you purchase from a local vendor, “there’s no certainty those dollars will remain in the local economy anyway.” That’s like saying when you smoke there’s no certainty you will get lung cancer. Ignoring the actual evidence borders on economic malpractice. 

Hirsh also misunderstands trade theory.  He writes:  “[W]hen cities and countries care only about keeping their dollars within their own economies, the benefits of global trade start to shrivel.” 

This is total nonsense.  With the wealth generated by buy-local programs, households have more money to purchase all kinds other goods, including imports.  In economic terms, buying more goods and services that can be competitively produced locally gives consumers the money to buy more foreign goods that can’t be competitively produced locally.  Paradoxically, more local purchasing worldwide would likely increase the volume of global trade.

Hirsh rightly points out that “local” is an inherently ambiguous word.  Figuring out the localness of a franchise owner who must buy supplies from a commissary thousands of miles away, for example, is tricky.  But perfection need not be the enemy of the good.  The evidence clearly shows that the more a company is plugged into a community, the more likely its benefits will multiply locally.   So even imperfect local purchasing can greatly boost a community.

The weirdest argument Hirsh makes is that “none of should be cowed into buying local…”  Cowed?  Really?  Would Hirsh describe the massive advertising campaigns of his company as cowing Albertans into avoiding other financial companies?  Local purchasing campaigns are ultimately about marketing.  They are about helping consumers freely make smart choices. 

Hirsh preaches the Golden Rule, and so do we.  The scarcity that Canadians are increasingly experiencing is not a scarcity of stuff, it is a scarcity of relationships, of trust, and of feelings of belonging. The localist movement is healing this rift.  

Michelle Long, executive director of the Business Alliance for Local Living Economies (BALLE), a network of more than 30,000 independent businesses in North America, argues the local purchasing is “building a relationship economy instead of a one-night stand economy." Surely, this is a better application of the Golden Rule than the corporatist vision offered by Hirsh.

By Nicole Chaland and Michael H. Shuman

Nicole Chaland is the Program Director of Simon Fraser University’s Community Economic Development Program.

Michael H. Shuman is the author of  Local Dollars, Local Sense: How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity and teaches Locanomics: Principles and Practice for Community Prosperity at Simon Fraser University.