The Christian Science Monitor quotes Schumacher Society on currency recirculation as a jobs development tool.
Staff of E. F. Schumacher Society
‘Buy local’ movement gives new life to corner stores
Communities urge residents to think and spend locally in a bid to boost area businesses.
By G. Jeffrey MacDonald | Correspondent/ December 1, 2009 edition
This working-class town of 18,000 on Boston’s North Shore has a plan for revitalizing its industrial sector, which long ago bade goodbye to textiles, carriage manufacturing, and a hat factory. It starts with an unlikely target: residents’ spending habits.
Local merchants’ “Amesbury First” campaign, due to launch early next spring, aims to get downtown bustling again by inspiring residents to do more shopping there – and less at chain stores in nearby New Hampshire. As more cash moves among local businesses, town boosters say, Amesbury will grow more prosperous and become a destination for shoppers and manufacturers alike.
“The initial goal is to get everybody – business owners, residents – spending money in their town,” says Stefanie McCowan, executive director of the Amesbury Chamber of Commerce. “Then the more people hear ‘Amesbury’ [as a place for business], it becomes natural for somebody to want to move their large industrial business here or bring operations that are going to help support our tax base.”
As recession gives way to the prospect of a slow recovery, communities are increasingly giving traditional development a turbo boost. In addition to courting outside businesses to get more wages and money flowing into their local economies, they’re also looking to increase the local money flow in hopes it will create jobs – and perhaps even lure outside businesses. This practical, two-pronged strategy is taking hold in Canada and the United States, involving entire provinces, like Saskatchewan, as well as small cities and towns in states as diverse as Vermont and North Carolina.
“If you asked what they’re doing to grow their economies, historically they would have said: ‘We’re recruiting business,’ ” says Billy Ray Hall, president of the North Carolina Rural Economic Development Center in Raleigh. “Now they’ll talk about: ‘We’re growing our existing businesses [in part by recirculating funds locally], and if we have an opportunity to recruit a business, we will aggressively pursue that, too.’ ”
To make the transition, communities have to measure their economies in new ways, notably their “leakage” – the amount of local money that moves to faraway hubs of commerce. Successful towns and cities minimize leakage by making sure most dollars spent locally recirculate to other area businesses. Less successful ones have plenty of leakage as dollars get spent once locally, then disappear.
Local merchants in New Orleans, for example, spend 32 percent of their revenues locally, twice as much as a typical chain retailer would, according to a study released in September by Civic Economics, a consulting firm with offices in Austin, Texas, and in Chicago. That’s largely because independent stores spend more of their profits locally and use local service providers, such as printers and marketing agencies, instead of corporate staffers based in other cities. The same study projected New Orleans residents could pump $235 million into their economy just by shifting 10 percent of their spending from national chains to locally owned businesses.
Other studies have projected similar results elsewhere. With a 10 percent shift, Kent County, Mich., could add 1,600 jobs that pay nearly $60 million in additional wages, according to a Civic Economics 2008 study.
“That’s really something,” says Civic Economics principal Dan Houston. “If somebody came to some town in western Massachusetts and said, ‘We would build a plant with 1,600 jobs and a $60 million payroll,’ what would that town do? They would roll over for that proposal and subsidize the daylights out of it.”
Recirculating currency entails more than a switch in consumer spending patterns, according to proponents of the strategy. To blunt leakage in the long term, communities need to focus on producing more of what they currently import from other geographic areas, according to Michael Shuman, author of “The Small-Mart Revolution: How Local Businesses Are Beating the Global Competition.” That means creating new businesses and, sometimes, new industries.
For a model, Mr. Shuman points to Hardwick, Vt. There, businesspeople have focused on supplying more of the region’s local food needs by creating new markets for area farmers. Entrepreneurs have built infrastructure to turn local soybeans into tofu, for instance, and to age cheese for area cheesemakers. Such enterprises, along with growing businesses in related trades, account for as many as 100 new jobs in this remote town of 3,000.
Other towns could take similar steps to depend less on imports from faraway places, Shuman notes, but financing is often a challenge. He argues that if regulations were changed to allow small investors to buy stakes in local private enterprise, then businesses could more easily grow operations to meet communities’ existing needs.
States and provinces are trying the same idea. The Saskatchewan Economic Development Authority this year launched a “virtual incubator” – an Internet clearinghouse to help firms source as much of their inputs as possible from other Saskatchewan-based businesses. Rhode Island state government has expanded RI Nexus, a Web-based forum where the state’s high-tech professionals find one another and do business.
Back in Amesbury, businesses are a long way from growing new industries to make the town or region more self-sufficient, but they are making a point of keeping money moving locally. Five local restaurants buy produce from Amesbury’s 145-acre Cider Hill Farm and tout their locally grown ingredients on menus. Cider Hill co-owner Glenn Cook, in turn, raises particular varieties of lettuce to suit the color preferences of Flatbread, a downtown pizzeria. He also makes a point to put money back into the economy by contracting, for instance, with Amesbury’s R.E. Kimball & Co. to turn his peaches into jellies. Sometimes local businesses charge more than others might, he says, but he finds the extra costs worthwhile.
Higher costs present a recurring challenge in the quest to stem leakage. Companies in many industries work with distributors that aren’t used to using local suppliers. Nonlocal suppliers sometimes beat local prices with high-volume shipments from other states or countries, where input costs are lower. To grow a vibrant local economy, businesspeople and consumers must accept that they’re going to carry higher expenses as a consequence, according to Susan Witt, executive director of the E.F. Schumacher Society, a Great Barrington, Mass.-based advocacy group for strong local economies.
“It’s changing our thinking from home economics to community economics,” Ms. Witt says. “When we do that, the home economics will be stronger because our neighbors, [schools, arts, and social services] will be stronger. That will come back to make our lives richer.”
Changing shoppers’ habits is a challenge, says Ms. McCowan of the Amesbury Chamber, even when local merchants charge competitive prices.
“Trying to convince people to not stop at Lowe’s on their way home – and instead to make sure that they run down to Amesbury Industrial [Supply Co.] on Saturday morning to get what they need – it’s a really long road in educating people,” McCowan says.
Some don’t concede that higher costs necessarily come with the territory of fighting leakage. Mr. Hall in North Carolina says consumers and businesses can grow their local spending sometimes just by finding deals that suit their needs. Even then, he says, towns need to recognize that local spending alone isn’t an economic panacea.
“Turning dollars around locally [through recirculation] will help to limit the amount of dollars flowing out of the region and be a stabilizing influence,” Hall says. “But it’s when you sprinkle entrepreneurship into the mix and have a commitment to grow businesses locally that you have a sustainable base.”
December 3, 2009