The Opportunity of a Locally-Focused Economy

A healthy local economy is neither totally self-sufficient, nor parochial but is clear on its priorities. One of its goals it to slow the rate at which money leaves the region, and maximize the number of times it changes hands before it does finally depart. Another goal is to plug what economists call “leaks” in the local economy. Leaks are the loss of money and economic activity for products or services that could be provided locally.

Writer and local advocate Michael Shuman sums up this strategy as LOIS, Local Ownership and Import Substitution. Local ownership is important because such businesses are not likely to leave the area and take their jobs with them. Money earned by local businesses stays in the region in banks that loan it out to people to start businesses or for individuals to buy cars or houses which spurs further economic activity.

Import substitution is local production of goods and services that have been previously provided from outside the region. For example, a family or small business that heated with oil or natural gas and switches to wood, wood pellets, or wood chips. While it is true that a local distributor of heating oil or natural gas also provides jobs, there are still important differences. Such concerns are local representatives of companies from outside the region. Ultimately, money they earn leaves the region to create jobs and opportunities in the community of the home office. What is so compelling about import substitution is that often that money is already present in the community and there for the taking. It is being spent year in and year out; it just needs to be redirected in ways that benefit the local community.

For both individuals and businesses one of the most important strategies is to “shop local first”. A wonderful example of this is a local food service that purchases in a series of expanding circles. What they can buy locally, they buy locally, what they can by regionally they buy within the region. If they can buy something that comes from the Midwest rather than California, they do so. As long as prices are reasonably comparable, they will pay a little more to buy locally or regionally. This makes sense both economically and in terms of what is sustainable. One of the ways that individuals can contribute to the economic improvement of the region is to localize their spending. If enough of St. Lawrence County’s 40,000 plus households and 4000 small businesses did this, the impact could be significant.

There are tens of millions of dollars at stake here. As an example, television advertising encourages St. Lawrence County residents to “take that short drive” to purchase their car in another county. If 3000 cars are purchased in this way at an average cost of $18,000 each that is $54,000,000 in lost sales for the local economy. If more people decided to shop locally and only 1500 cars were bought elsewhere, there would be $27,000,000 stimulus to the local economy, new jobs for mechanics, salespersons, and office help. Currently, these jobs are being created in a neighboring county.

St. Lawrence County’s four thousand businesses could also benefit the local economy by patronizing other local businesses first. During the several years I operated a small online business I shopped locally as much as possible.

Going through the various sectors of our economy, food, energy, autos etc. it is not hard to see that there are tens of millions of dollars that could have a local impact. The ingredients for creating a more healthy local economy are present, but locked up in ways that do not benefit us to the extent they could. Shopping in our communities at locally owned businesses is a key step that is also very doable.