Buying local boosts economy — and residents’ well-being


Ed Kemmick/Last Best News

A three-year study of 26 communities by the Knight Foundation found that “attachment to place” by the residents was the top indicator as to whether or not a local economy was prosperous.

Why are some places crackling with energy and economic vitality, while other places seem lifeless? What qualities give long-term resilience and stability to a local economy instead of a boom-and-bust roller coaster economy?

And, looking closer to home, what can we as citizens individually do to make sure Billings is a vibrant, economically vital place?

In trying to understand the complexity of an economy, I like to imagine a local economy as a bathtub. In this analogy, water is money/value. (They’re not necessarily the same, but it’ll work for our purposes.) Water pouring into the bathtub from the spout comes from the collective sales of resources, goods, and services, and the level of the water in the tub is wealth, the accumulation of assets.

Conventional Local Econ Model diagramIn a local economy, wealth would comprise not only the money collectively held by its residents in banks but also all the infrastructure, building stock, and “stuff” contained within it. And the goal is to have enough water in the bathtub so that all residents not only have their most basic needs met but also can pursue happy, meaningful lives.

At the same time that water is entering the tub, however, there are outflows of water, representing the local assets that have to be expended to import resources, goods and services from outside the local economy. A lot of conventional economic development models have focused almost exclusively on increasing the flow of water into the bathtub/local economy.

But if the flows of water out of the tub equal or exceed the flows into the tub, there is no wealth accumulating in the local economy. Clearly, it makes a lot of sense to identify the major leaks from the bathtub/local economy and then pursue strategies to reduce them. This is an important part of any comprehensive economic development model.

Some of those leaks include imported manufactured goods, profits sent to distant corporate coffers, utility expenditures wasted on energy inefficient building stock and equipment, and internal outlays for expensive infrastructure that doesn’t increase the productive capacity of the local economy, such as that associated with automobile-oriented sprawl.

Healthy local economies not only have a strong base of goods and services to export (water into the tub) but also relatively few imports (leaks) because they have a rich, diverse “ecosystem” of locally produced goods and services that displace imports.

(And they also make smart investments in building stock and develop mixed-use neighborhoods with multi-modal transportation systems. But that’s a discussion of for another time.)

Resilient Local Econ Model diagramIn short, if you want to have a healthy local economy, it’s really important that you shop at locally owned businesses. There’s a powerful multiplier effect for local businesses. Here’s how it works.

Let’s compare the impact of coffee houses on a local economy. On the left, we have six Starbucks locations, and the right we have six local coffee houses.

CoffeeHouse_comparisonStarbucks is actually a responsible, quality national chain corporation. It pays a living wage and provides good healthcare benefits, so it isn’t pushing all of its costs onto taxpayers, as Walmart and some other chains do. But, despite those good qualities, there are still benefits to the local economy of patronizing the local coffee house.

Assuming two businesses of the same type and volume of sales, one a national chain and the other a locally owned business, there will be a comparable benefit to the local economy in terms of employee wages (the primary effect) and taxes. But then the differences emerge:

♦ Secondary effect: local businesses typically use the services of local payroll services (or have in-house staff), accountants, graphic designers, web developers and attorneys. National chain stores aren’t getting these services locally; those jobs are at some distant corporate headquarters.

Tertiary effect: the secondary effect personnel, in turn, need office space, so they support local landlords, real estate agents and maintenance workers.

♦ Donations: because local businesses have more direct relationships and a greater interest in supporting their own community, local businesses support local charitable and community causes at twice the rate of national chain stores, according to a study by the Small Business Administration.

♦ Local producers: local businesses are more likely to carry locally raised food and locally made items, strengthening rural economies and urban-rural relationships.

So the local businesses plug many of the leaks in our bath tub/local economy, keeping our incoming resources recirculating much longer and building up wealth in our local economy.

A couple of studies conducted by Civic Economics are illustrative. In New Orleans, for every $100 spent at a national chain retail store, an average of only $16 stayed in the local economy. But a locally owned retail store on average kept $32 recirculating in the local economy.

In west Michigan, for every $100 spent at a national chain restaurant, only $37 stayed in the local economy, compared with $56 for a locally owned restaurant. The averages will vary by the type of business, the degree to which local support services are available and what percentage of its sales are of locally produced food and other goods.

Compiling nine studies that Civic Economics conducted in different types of businesses yielded the following results:

AMIBA graphic

More than 20 percent of the sales volume at the Good Earth Market, for instance, is from local producers. Some of the goods are unprocessed, like grains, meats, fruits, and vegetables, and some are cottage industry items like jams, baking mixes and salsa.

While the total sales volume and payroll of the Good Earth Market is somewhat smaller than many national and regional chain grocery stores, it provides disproportionately large benefits to the local economy. To use a boxing metaphor, it punches way above its weight class. It’s a champion for our local economy.

But the benefits of buying local extend beyond just strengthening the local economy. Our sense of well-being is in a large part due to the degree in which we are grounded in our sense of place. We derive pleasure and meaning from understanding and feeling like we are a part of this place. And according to a three-year study of 26 communities by the Knight Foundation, “attachment to place” by the residents was the No. 1 indicator as to whether or not a local economy was prosperous.

And feeling a sense of place is not limited to our interactions with the landscape. The Rims and Yellowstone River as well as the mountain ranges at our horizons root us in our place, but so do local institutions like the Alberta Bair Theater, Yellowstone Art Museum and Western Heritage Center.

And so do local businesses. They are unique to this place, not carbon copies from Anywhere, U.S.A. We seek an authentic connection to place, and so the long history of the Northern Hotel has a drawing power, as does Cricket Clothing Co., Desmonds Men’s Store, Neecee’s, Art House Cinema & Pub, Gainan’s, MasterLube, Toucan and Billings Hardware, to name a few.

Locally produced food also connects us to place, and there are locally owned restaurants that use locally produced food, including Lilac, TEN, The Fieldhouse and Good Earth Market. And we are truly blessed with a number of craft brewers.

These local businesses not only do double duty in developing a healthy economy but also infuse Billings with a creative, vital energy. So, if you want to see more of this in Billings, live your values and patronize local businesses.

Make it a resolution for 2016 and beyond. You’ll be happier and the local economy will be healthier for it.

Ed G

Ed Gulick

Ed Gulick is an associate principal at High Plains Architects and past chair of Northern Plains Resource Council. He returned to Billings in 2004 because he is deeply committed to protecting the region’s greatest assets and enhancing the vitality of its communities.

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