Local Economics 101

July 13, 2009 by Jay Beckwith
Local Economics 101

Several years ago I bought a 750lb. variable-speed drill press from an online company.  They import directly from China and better than 90% of their distribution is internet-based.  I paid for it on my credit card and it was shipped by an interstate carrier, so only a few dollars stayed in the local economy.  As you might anticipate, the unit was defective.  The company tried hard to help me fix it without success.  The shipping crate was long gone as was the crane I used to offload and install it.  Since it is an oddball machine there doesn’t seem to be anyone in the county who can fix it.  I’ve now got a very ugly, immovable and very expensive lesson in the wisdom of shopping locally.

While that lesson was quick, some come more slowly.  A few years ago I began to study up on the impact of corporate stores on local economies.  Don’t get me wrong; I have nothing against someone building up their business until they can have many stores in lots of places.  In fact I’d love to see some Sonoma County businesses have similar success.  I also don’t have a problem with folks buying online, and I encourage every business owner to develop their own robust web-based store.  The problem I have is when we have many more corporate stores operating in, or selling online to, Sonoma County than we have Sonoma County businesses operating in many other counties and states.  We now have a big imbalance, with the result that we are exporting many medium-to-high-paid jobs.  This imbalance creates a “trickle-down” effect where our most talented citizens are underemployed or have to commute to earn a living.

Sure, everyone wants to save a buck. In fact one way of looking at capitalism is that the only valid criterion for business success is lots of profit, which is another way of saying “take the most and put back the least.”  But there is another way of looking at enterprise that is gaining increasing popularity.  It’s called “fair trade.”  This idea is expressed in many ways, from buying imported products that don’t harm the indigenous people and environment, paying a living wage, “slow money”, or shopping at a locally owned store to protect local jobs and investments.  A change of heart and mind is taking place and people are beginning to understand that in the long run money that stays part of the local/regional economic ecosystem is “reused” by us rather than taken out of town and that the sales tax revenue is a poor measure of a healthy economy.

Shopping locally not only supports jobs, especially those of midlevel managers, but also supports local vendors, services, financial institutions, schools, small non-profits, and other elements in our economy.  All of these groups in turn spend their dollars locally and so on, and so on.