Does buying local really help the community?

December 4, 2008 9:38 AM

Buying local: Facts and fictions. Help me sort through the arguments about buying local as I get inundated with requests to do so this holiday season.

Local businesses have launched an initiative to "buy local" and have started making claims such as "for every $100 spent at a locally-owned business, $45 goes back into the community and local tax base. For every $100 spent at a chain store, only $13 comes back." This seems a) outlandish and b) impossible to actually know.

It's my understanding that money can't "stay" in a community any more than air can "stay" in a community. The products that many of these people are selling are made in other cities, states, and countries. Merchants may or may not live in the community that houses their business and they themselves may not exclusively "buy local" hence the money that you are trying to keep in the community has effectively left the community.

I also know arguments about increasing the size of the "pie", i.e., commerce helps provide jobs in other countries and helps the situation of people outside the community as well.

Is this misguided? Something about the "buy local!" campaign raises my hackles as being insular and based on false assumptions. Am I wrong? Is this doomed to be an ideological question? Please provide arguments one way or the other (citations would be great as well!)

posted by proj to work & money (25 comments total)

The only thing that makes sense for it to be 45% is if they're selling wares that are made locally, not just sold locally, so that if X Company makes A product in B Township, and Y Company buys X Company's product in the same B Township, they are paying the taxes in B Township as well as the taxes that you, the consumer, are paying at Y Company's store, purchasing X Company's product, all in B Township.

So, unless the product is made in the same city, I think the 45% is bullshit.

Caveat: I'm not an accountant. I'm not even sure I can add.
posted by banannafish at 9:46 AM on December 4, 2008

On the surface, their claims make sense. A local business doesn't kick up any of its profits to the corporation or pay dividends to shareholders, nor does it pay regional, district, and state managers who live far outside the town in which the store exists. Chain stores also (generally speaking) don't pay local sales tax. Of course some money always leaves the community, but a lot more theoretically stays when you "buy local."

However, the real question when determining whether the money stays in the community is where local business owners are spending their money. Where did they get their various business loans? If it was with a local bank, is it a national or state chain? Odds are the payments go to a national bank. Further, what are the owner's investments? It probably isn't in local businesses. Did he/she buy their equipment from a local shop, or from a wholesaler? What shipping company did they use?

I guess what I'm getting at is that any business owner is going to be doing just about zero to "invest in the community" as they are trying to get you to do. As you mentioned, the money is staying local only insofar as the merchant's wallet is locally located. So while a few bucks may get passed around in your town when you buy local, the effect is only felt by the business owner who tricked you into paying twice as much at his/her shop.
posted by Willie0248 at 9:54 AM on December 4, 2008

My understanding of the "buy local" trend was to buy items produced locally, especially food to save on shipping costs and be more energy efficient.

Our NRP station did a great show about the local food economy in North Carolina. For instance North Carolina is the largest producer of sweet potatoes in the country, but much of the sweet potatoes in our grocery stores come from California. They also mentioned that food distributors set up regional centers, so much of the food for NC comes from Atlanta.

However, if you are buying a stuffed animal made in China, I don't think it matters if you get it from Amazon.com, Target, or Joe's local shoppe.
posted by wrnealis at 9:58 AM on December 4, 2008

If you'd like to read a well-researched and well-cited text about the value and use of shopping locally, I suggest Bill McKibben's Deep Economy where he lays out more complex analyses of why these things are true. It may be that McKibben comes from Vermont (by way of upstate NY) where merchants often DO live in a community and there are fewer in-between people that need to get paid when I buy a sandwich at Floyd's store then when I buy one at McDonalds (a choice I made just today, in fact). I'm not sure if that holds as much water in a suburban community where you don't have as many local options and when people who work for the merchants may not be from the community.

And I don't know about other places but here the merchants tend to bank locally, shop locally and spend locally [you know it because you see them do it, it's not just smoke-blowing PR] which is one of the things people point to as a reason Vermont is not having some of the same terrible downturns as other places. Of course some of this is just taking in each other's washing, but there are also intangibles to doing business locally -- one of McKibben's stats is that people who shop at a farmer's market on average interact with ten other people, local people, while they're there and this has social value even if it doesn't have direct economic value -- that can't translate into stats.
posted by jessamyn at 10:24 AM on December 4, 2008 [5 favorites has favorites]

I think the larger issue -- which I'm sorry to keep chattering but I've been thinking about it -- is what you mean when you talk about value. There's money-only value and then there are other values and things people care about. So a few more links for things to read

- a more free market critique of McKibben
- McKibben debates this topic frequently in fact.
- Can Vermont feed itself is a fascinating article about local self-sufficiency
- This local economy food report from Seattle is one source of "buy local" stats that are often reprinted in things like this infographic. It's 190 pages, feel free to dig around in it and on the Sustainable Seattle site.
- also mentioned frequently is the Andersonville Study (big pdf) which is I think the starting poitn for a lot of this.
- more resources, stats and links on this page
posted by jessamyn at 10:42 AM on December 4, 2008 [5 favorites has favorites]

Services are a large percentage of a small businesses expenses. Local spending on services can be a huge benefit to the community even if the products sold in the small business are not particularly local. In other words, the money might not come back to a local producer of a product, but it will come back to the accountant, electrician, plumber, web developer, caterer, etc. In other words, Hallmark probably does not employ a local bookkeeper, a local plumber, a local graphic designer, a local print shop, a local web guy. Joe's gift shop probably does, even when he sells imported merchandise.
posted by gyusan at 10:49 AM on December 4, 2008

I shop locally because it makes me happy.

Less Driving:
I save gas, time, and the frustration and stress of navigating traffic. I get a little exercise walking from store to store and breathe some fresh, cool winter air into my lungs. It's environmentally friendly, it saves money, it gets my heart beating in a happy way (not in an "omg, that $%*@*%@ just cut me off in the Target parking lot!!!!! way).

Less Crowded:
Most local shops will be quieter and less chaotic than at department stores. You don't have to climb over people to get what you're looking for and you won't have to be climbed over by others. Parents will feel more pressure to keep their whining children under control when the store atmosphere is one of tranquility. You can hear yourself think and make better choices about what to buy.

Less Waiting:
In my experience, the staff-per-customer ratio is often much higher at local stores and therefore they can get you rung up and checked out very quickly. You'll also spend less time navigating your way through Goliath aisles at box stores with dizzying amounts of inventory, and will be able to get efficient, knowledgeable help from a staff person faster. All of this will save you time, which (as they say) is money.

Good things come in small packages:
You will be supporting small business, which in many cases is like a big high-five for the struggling middle class and a polite F-You to the obscenely rich. In my local shopping experiences, the owners of the store are usually on the premises and sometimes are working behind the counter or register right alongside the staff. If you have a complaint, a suggestion or a question, you can take it right to the top dog who will actually see/hear you talking and may well actually take what you have to say into consideration. After all: to a small, local business your patronage means A LOT more than it does to say, the Sam Waltons of the world. Think about it percentage-wise.

Impact on Local Character:
Where/How I spend my money locally has a direct impact on the character of the place where I live. My local shops give my town a very unique flavor, which attracts tourism and thus draws more money into the community. Box Stores tend to flatten a town's appeal, turning it from "somewhere" to "anywhere" (or worse...after corporate interests pack up shop and move to greener pastures, "nowhere.")

Goodwill:
The holidays are a time of giving. If I buy a present for my sister from Target, then I give a gift to one person. If I buy a present for my sister from Candle shop that my neighbor owns, then I give a gift to two people: my sister and my neighbor. I might spend a few bucks more to purchase something from a shopowner that I know personally, but the feeling of happiness that I get from knowing my patronage is sending their child to daycare or assisting them in paying the heating bills is worth way more than a few dollars. Sure, someone will profit no matter where you shop, but when you shop locally you can actually know WHO is profiting and see HOW that money made a positive difference in their life. Call me crazy, but it really does feel good. Added bonus, let's say I own a daycare, and this person decides to send their child there. Then the money I spent at the store actually IS coming back to me.

So there you are. Buying Locally: Will it enrich your wallet? It could. Will it enrich your life? Definitely. I'm not sure how you could go wrong.
posted by RingerChopChop at 11:13 AM on December 4, 2008 [3 favorites has favorites]

If you want to help other people with your money, donate to a charity. You'll know exactly where your money is.

Buying local and expecting the money to magically "go where it needs to be" is charity by way of black magic and voodoo.

Practice some common sense - business transactions should not be charity transactions. You know nothing about the other party's intentions and they have every incentive to lie to you in order to gain your money. Do you really think local business activists are advertising to "help the community"? Question their intentions - I don't see them as anything other than profit-mongers. That's not a bad thing, of course. However, if they're doing their jobs, they have only their own wallet in mind rather than the community.
posted by saeculorum at 11:17 AM on December 4, 2008

I'm a marketer and I belong to an entrepreneur group. I don't have research to back me up, although I'm sure I could source some. But I wanted to give an example of the difference between buying local and from a national or transnational chain.

A local manufacturer or merchant tends needs more than their own strength. So they forge alliances with other merchants, manufacturers, suppliers and the like. They attend local tradeshows, often put on by local event marketers, as opposed to the huge and expensive fairs. They hire local marketers. They get their start by working with local sales agents. The merchants are more likely to purchase local goods, because they aren't bound by head office's mandate and they may want to show good faith by supporting the community. They often buy their business cards, flyers and other marketing materials locally. They hire local graphic designers. They tend to hire employees from the local area, since they don't have a stock of managers in training in far-flung regional locations. They hire local consultants and freelancers (although eLance and other sites have changed that a bit) -- but their sources for expertise on their markets are typically going to be local. And the local firms tend to band together and do joint and cooperative marketing, since they don't have the ad dollars of a national chain.

A national chain or big box store relies on the mandate of head office. Head office hires big agencies, consultants, designers and so on close to the head officer's home. They rely on bulk buying and are less likely to source locally. They've got a national brand, so they probably don't spend as much time at small potatoes trade shows and the like. They rely on volume and speed, so economies of scale shape their earnings -- they may not need as many managers earning family-supporting incomes.

National chains and big box stores are not necessarily a bad thing. And not all local firms are good firms. But I did want to give you an idea of the inputs for a local firm. I think the 45% figure makes sense.
posted by acoutu at 11:21 AM on December 4, 2008 [1 favorite has favorites]

I appreciate the answers so far, they are very thoughtful. However, only Jessamyn has provided citations that provide any empirical evidence of these claims other than "it seems like" or "it makes sense" or whatnot. Some of these answers seem to me to buy into the "mythology" of local/small businesses, as if all local and small businesses are wonderful utopias of goodwill where the shopkeeper will bend over to make you happy. Please keep the input coming, but please cite your arguments if possible!

Also, I am even more skeptical of this argument when it applies to food.
posted by proj at 11:36 AM on December 4, 2008

It all comes down to comparative advantage economic theory. It's in any macroeconomics book you can find. Buying local for the sake of local ignores that other places can produce the good you desire more efficiently. This is disadvantagous for both parties involved.
posted by saeculorum at 11:46 AM on December 4, 2008

The $45 comes back in the community sounded familiar and I thought it had something to do with the "Keep Austin Weird" buy from local shops movement. And dammit if that quote didn't show up in the Keep Austin Weird entry in Wikipedia. Unfortunately, the link cited as the source of that quote in Wikipedia to the Daily Texan article is broken and I couldn't find it searching the Daily Texan's website.

In that case, the Keep Austin Weird merchants successfully kept Borders from building in the 6th and Lamar development about four years ago. The local independent bookseller BookPeople is on that corner as well as independent music seller Waterloo Records. On this land today is Whole Foods HQ (offices upstairs, flagship store at street level). Book People and Waterloo are still in their respective places. The old Whole Foods that is in the same building as BookPeople is now an REI (not exactly keeping Austin Weird). A lot of the outcry around this had to do with the city giving incentives to build the development, giving incentives to big national retailers that didn't need it to compete with little local places. Borders did end up building an outlet in a development in the north part of town and did get incentives.

I wish that report was available online to read since I don't see how they got this 45% number for books, CDs and DVDs. Although Waterloo and BookPeople have significant shelf space for local and regional artists, they still get most of their stock from the big distribution outfits and publishers that Borders would go to. That same money would leave town. Although I try to frequent local businesses when I can, this 45% metric doesn't wash with me.
posted by birdherder at 12:08 PM on December 4, 2008

This isn't bullshit. Having lived in both types of places - places where local business were independent and well supported, and places served by chains - the anecdotal benefits are huge. One I will mention is that local businesses supply me with a large portion of my employment. I work for a cultural organization, a nonprofit, and a significant portion of our annual fund donations (along with in-kind donations of goods and services) comes from our local banks, an oil company, toy store, bookstore, plant nurseries, a local specialty-foods business, a financial-services firm, and individual business owners. There's no way that national chains would donate to employ me to contribute in the way I do to the life of this community - they have no reason to care. But without these donations, we would not meet our annual budget and would eliminate staff and programming. So there is one clear material benefit to "your money staying in your community." The same goes for high school marching bands and booster clubs, sports teams, local theatres, etc. Think of some nonprofit organizations that improve your community life, and call them up and ask them what business are their major donors. Most of them will be local. Chapter 3 of this study showed that small, independent business owners are more likely to be leaders and members of community organizations, and they give an average of more than 2 1/2 times the amount of money per employee than large chains do.

In addition, we are a large employer ourselves and have constant need for services - auditing, accounting, construction, maintenance, insurance brokerage, program and event supplies, artists and musicians and scholars to make presentations, seeds and plants - and we source almost everything locally, returning dollars donated to us back to skilled people in our own economy. This creates a very strong, mutually supportive network that contributes a great deal to our sustainability as an institution. We are all stakeholders in one another, and no one wants anyone to go down.

The statistics you read are based on several economic reports done over the past couple of decades. The Business Alliance for Local Living Economies, or BALLE, is a nationwide network of communities working to promote local economies in several dimensions. They maintain a "Resources and Studies" page that includes a list of studies of specific local economies that have analyzed the effect of local buying on local economies. The Andersonville Study is one of the heaviest-hitting of these. Another study closer to my neck of the woods, in Maine (where the rate of poverty means that these discussions are definitely not idealistic or academic) done by the Institute for Local Self-Reliance showed this:

Locally owned businesses spent 44.6 percent of their revenue within the surrounding two counties, and another 8.7 percent elsewhere in Maine, largely on wages and benefits paid to local employees, goods and services purchased from other local businesses, profits that accrued to local owners, and taxes paid to local and state government.

Big-box retailers return an estimated 14.1 percent of their revenue to the local economy, mostly as payroll. The rest leaves the state, flowing to out-of-state suppliers and back to corporate headquarters.

More information:
The Hometown Advantage
Big Box Tool Kit
The Local Multiplier, a tool that helps explain why money is not exactly like air in the way in which it circulates (it can be reused, for one thing), and how its economic impact is multiplied in circulation

Other reasons I like to shop locally whenever I can:
- I know the business owners and employees, and they have power to do things chain stores can't do. Chain stores are hampered by top-level policy. Local business owners can decide to partner with you on projects, donate prizes for your auction, devote a store window to your local event, think creatively and move quickly. This is not as true with a national, and I know, because every year I need to do all these things and more and it's easy to compare the response from locals vs. nationals. Starbucks is pretty good about donating to events, but they're the exception, and only if it fits their community-building criteria. Local business owners and employees are invested in the community in the way an out-of-town owner of a major chain, healthcare company, or manufacturer can never be.

-Community security. Our infrastructure sucks; having lived through 9-11 and witnessed Katrina, it's important to me to live where there are people who have a diversity of talents and skills, including leadership and comprehensive business management but also farming and building and water purifying and entertaining and plumbing and heating and child-rearing and medicine...and you don't get that kind of development of community skill when you have all external chains.

-It's more fun; local business have a more unique character and create a sense of place. I don't like it when I travel and it's exactly the same as hundreds of other places.

- Better sourcing. A local business doesn't have to use the supply chain established at the Head Office that does wacky things like route all deliveries through Florida before sending them back to Maine, or ship apples from New Zealand to New Hampshire...in October. They can choose to change suppliers, use local suppliers (there's your multiplier), offer local produce in season, take a flyer on a new product or innovative idea

-More creative approaches. What works in one community doesn't always fly in another. I like that our local businesses can tailor events, sales, in-store happenings, performances, and merchandising to the season and things that are important to people who live here.The Gap is the Gap wherever you go, but my bookstore's in-store events are totally different from other bookstores' in other places. Same with the cooking store and its cookiing series and wine-tastings, the toy stores, the local bars.

I've done a lot of work on this in my own community and the benefits are palpable. I think it's great that you want to learn about the hard numbers behind it, and I hope you do, but some benefits are non-quantifiable, so look for those as well. And finally, you don't have to take it on faith that this works. Why not try it out? On the model of an Eat Local Challenge, why not just set aside some portion of your budget - nothing scary, maybe 25% - and dedicate that to local shopping for your holiday needs. Or pick one week or one shopping day and shop locally as much as you can.

And you don't have to switch over totally; there's definitely room for trade, and it's important to maintain a balance of national, regional, and local businesses. But even if you make a small shift, it will have a large impact. ONe study in Maine showed that if Maine households switched just 1% of their total annual food budget to the purchase of Maine-grown foods, it would generate 5% more income for allMaine farmers, which is basically a sufficient bottom line amount to keep all the present farmers actively farming on their land. That's pretty huge; and 1% is a very small individual shift.

So definitely check it out. Try local just a little bit to test this for yourself. Talk to the merchants and ask them what they see as the real benefits, as a business owner. Notice your reactions as you shop in these places and compare them to an evening out at Linens N Things or the mall. See if you walk more or less. See if you notice more or less. See if people act differently. Ask clerks what charities those businesses support. You might even consider looking up your local chamber of commerce and/or buy-local business alliance and finding out when they have their social events - most Chambers do and a lot of local-support groups do too. Here, there's a once-a-month Chamber Night where people nosh on apps and drink free drinks and people in the business network talk to one another. They're kind of fun and always interesting. It's another good way to get a window into how your local economy runs.

Local economies really are different. And there are reasons. A big part of the reason is how the money flows around your town, and through what institutions. Good luck finding out about it!
posted by Miko at 12:12 PM on December 4, 2008 [7 favorites has favorites]

Oh, finally: I had this dramatically illustrated to me during a recent business trip to Minneapolis. I'd been doing all this local-first activity, and talking about the benefits of shopping at our local hardware or cooking store or whatever instead of, say, Target. But what really brought it home to me was when, in Minneapolis, I went to several institutions - the Minnesota HIstory Center, the Guthrie, the Walker Art Institute - and they were all drop-dead gorgeous and modern and fantastic - and all of them had prominent, obvious labels all over the place thanking Target for their donations. and that's awesome; Target's a Minnesota company. But as someone in a nonprofit doing a lot for my own city, I realized that I was looking at dollars that didn't go to us and our cultural institutions. When my neighbors and I in NH and Maine shop at Target, we are building AWESOME cultural institutions...in Minnesota.

I sure hope one day they can all go there and see the terrific museums they built.
posted by Miko at 12:18 PM on December 4, 2008

Where do you think those businesses get the money to donate to the community, Miko? They get it from your wallet.

You can either choose to donate directly to the community or pay a local business more and hope they spend the money on the community. The latter choice is nonsensical.
posted by saeculorum at 12:25 PM on December 4, 2008

Looks like these numbers might come from a study done by this group in Austin in 2002 comparing a Borders to local book stores in terms of economic impact:

Summary (pdf) (page 4 has your $13 versus $45 numbers)
Full study (also pdf)

A quick glance at the study does not give me much confidence that we can really understand what they did, particularly this line on page 6: "Details of the underlying data, assumptions, and methodology have been withheld to protect the privacy and business practices of the local merchants." But they do explain their rationale a bit.

Ideologically and aesthetically I'm on the pro-local-business side. But I'd point out that some of the same kinds of hand-waving logic about money flow and economic multiplier effects is what is used to rationalize giving big tax breaks or cash incentives to sports stadiums or new car manufacturing plants etc. Actually, looking around at the economics literature on that issue might help you think about this question as well.

On preview: these are the same people doing the Andersonville study. And yes, it sounds like it was about the situation birdherder is referring to.
posted by yarrow at 12:28 PM on December 4, 2008

My experience is purely anecdotal but worthwhile nonetheless. I live about 15 miles from downtown Buffalo, NY. The nearest large town is Lockport.

I buy apples from the farmer less than a mile from me. They grow eight or so varieties. All varieties are $.55/lb. At the local/chain grocery store, the price varies a fair amount based on variety but none are less than $1/lb. They'll have apples in cold storage through the spring but I'm guessing the price'll go up a bit over time. Even so, still less than the grocery store.

I purchase my thanksgiving turkey from the same farm. I paid about $2.25/lb. I haven't looked at turkey prices in the store but I'm pretty sure it's less than that. To me, that's a wash b/c I know the conditions the turkey was raised in. And it's not loaded with salt.

I get fresh concord grape juice from the same farm but I know they get it from another local farm. It was $8/gal this year. Ditto apple cider (I'm pretty sure they get it from another local) but I think around $6/gal.

Fortunately for me, the winery across the street has significantly improved their product over the past several years. The prices are in line with the liquor store but the location is a lot more convenient.

The "farm stand" that I like to go to in the summer/fall has some local produce (strawberries, peaches, apples, tomatoes, etc). I know the farmer who owns it drives to the produce market in Buffalo every morning (he said he gets up around 2:30am) to get stuff he can't grow. The potatoes generally come from Maine, the other produce all over. The presentation is typical farm stand: fruit in little wooden baskets. The blush off the process came off for me when I saw the girls picking the little grocery store labels off the plums. That said, his prices are quite competitive with the grocery.

As for other goods... with a few exceptions, I've either purchased directly from local artisans or crafters on the net (go Etsy!). My sweetie wanted a specific necklace design from a catalog and I was able to find it on Etsy for less than half the catalog price.
posted by jdfan at 1:20 PM on December 4, 2008

You can either choose to donate directly to the community or pay a local business more and hope they spend the money on the community. The latter choice is nonsensical.

This depends on where you live. At the risk of turning this into a discussion and not a fact-finding mission for proj, I have to say that in my community we spend money at the local businesses and it returns to the community. We see it. They donate to charities, sponsor programs for the kids, spruce up the town, etc. And yeah, I could donate that "extra" money directly to do that but doing it via, say, Belmains [the local department store] both does those charitable things and also employs my neighbors and gives me a place that I can walk to in order to buy birdseed, socks, postcards and Sharpies. If that's not something you personally value, that's totally fine with me. But there are values associated with

- not driving to a store
- having the people working in the store be people I know
- having the people in the store be people who are getting health insurance as part of their job
- having the people in the store know stuff about the things in the store and be responsive to my feedback about the store
- having the store be the same store that my neighbors go to
- having the store be one place I can go to to get most of the stuff that I need

etc. I don't mind paying more for that. If (extra) money from my wallet goes directly to health care for someone working a register job I'm not only okay with that, I think that's how stores should work. Wal-Mart's low prices come at incredible human costs not only to the people who work there most of who don't get health care but also the social safety net which often provides subsidized health care as well as food stamps for people who are working poor. You're paying either way, as I see it. It's not "nonsense" it's a differing set of priorities.

I don't know whether or not any particular region's "buy local" campaign may or may not be trying to convince you that shopping there has advantages that perhaps it does not, but I know here -- where I really don't see Buy Local stuff much since people just do it anyhow -- you can see this stuff at work and the data also supports it.
posted by jessamyn at 1:32 PM on December 4, 2008 [2 favorites has favorites]

Where do you think those businesses get the money to donate to the community, Miko? They get it from your wallet.

Yes, that's exactly the point. Or what jessamyn said.
posted by Miko at 1:45 PM on December 4, 2008

Where do you think those businesses get the money to donate to the community, Miko? They get it from your wallet.

You can either choose to donate directly to the community or pay a local business more and hope they spend the money on the community. The latter choice is nonsensical.

Because a business owner can't also be a charitable person who cares about their community and donates out of their profits/income rather than by raising prices on consumers? A local manager of a big chain store can't decide to use the store's earnings to support the store's community-- but if the profits go to a small businessperson in the community, they sure can because they call the shots. The fact that you think that every businessperson must be solely focused on maximizing their profits is all the more reason to support small local businesses where that isn't necessarily the case.
posted by EmilyClimbs at 4:14 PM on December 4, 2008

I'd like to put in a reference to Bastiat's parable of the broken window. The whole chain of money spent within the community of the parable is not that different from the common arguments of how money would slosh around within a community. To me, a lot of the "buy local" analysis looks at what the local merchants and suppliers wind up doing with this money, and not a lot at what consumers would do with money saved by buying at national chains, i.e., Bastiat's distinction between the seen and the not seen.
posted by chengjih at 5:38 AM on December 5, 2008

To me, a lot of the "buy local" analysis looks at what the local merchants and suppliers wind up doing with this money, and not a lot at what consumers would do with money saved by buying at national chains,

In some sense, we can see that in effect, as it's the prevailing system to buy at national or regional chains. So any analysis would, presumably, reveal the world we presently have - except in greater detail.

But there is an embedded assumption that national chains are always cheaper, which isn't universally true. Some research has showed that grocery stores and pharmacies are often cheaper as independents than when nationally owned. Wal-Mart, especially, is known to use loss leaders to draw people into the store, but higher prices often prevail on other goods people buy while there for the convenience. And once their local market competition is driven away, they raise prices.

Also, there are public costs to the development of national chains that also need to be seen, and those are borne by the taxpayer - so in a real sense, even if you are saving dollars at a national chain, your municipal tax rates are likely to take them away from you again. In addition, as they drive down wages and replace jobs with benefits with jobs without benefits, there is less money available in the local economy, and more public costs for publicly funded health care, hospitals, child youth insurance, unemployment benefits, food need, etc.

Some more: Next STep, in Minnesota, says:

U.S. counties that gained Wal-Mart stores during the 1990s fared worse in terms of family poverty rates than those that did not, according to a 2004 study by researchers at Penn State's Center for Economic and Community Development. Download the study, "Wal-Mart and County-Wide Poverty," at http://cecd.aers.psu.edu/policy_research.htm

A 2002 guidebook from the London-based New Economics Foundation (NEF) provides a step-by-step process for measuring the local multiplier for a particular business or organization. It has been tested on agriculture to social enterprise to local government procurement. "The Money Trail" (134 pages), available for free download at http://www.neweconomics.org/gen/z_sys_PublicationDetail.aspx?PID=128 ) has easy-to-follow directions, sample survey forms, troubleshooting tips, and case studies. See also supplementary materials and downloads on NEF's Plugging the Leaks website http://www.pluggingtheleaks.org

Big box retail, shopping centers, and fast-food restaurants cost taxpayers more than they produce in revenue, according to a fiscal impact analysis in the Town of Barnstable (villages comprising 48,000 people on Cape Cod), Massachusetts. The study was conducted by Tischler & Associates (now TischlerBise - see http://www.tischlerbise.com/pages/) of Bethesda, Maryland, which provides cost of growth services (fiscal impact analyses and impact fee calculations) to public and private sector clients nationwide. The Barnstable study compares the tax revenue generated by different kinds of residential and commercial development with the actual cost of providing public services (mainly road maintenance and public safety) for each land use. It found, for each 1,000 square feet, net annual deficits/surpluses of:

* Big box retail: $468 deficit.

* Shopping centers: $314 deficit.

* Fast-food restaurants: $5,168 deficit.

* Specialty retail (includes small-scale main street businesses): $326 surplus.

* Business parks, offices, and hotels also generate a surplus.

Public subsidies to chain stores such as Wal-Mart (over $1 billion nationwide) obviously skew the economics; see http://www.goodjobsfirst.org/ for details and model language for restricting retail subsidies.

posted by Miko at 7:00 AM on December 5, 2008

Miko: I'm legitimately curious about your position. I understand that local businesses can be cheaper and that they can be beneficial to the community. However, I still don't see a correlation between the two. Could we not reduce this to "go to the business that benefits the community the most" or "go to the business that is cheapest" instead of "go to the local business"? It still seems to me that you're arguing for local businesses for their own sake. Sure, there are examples of cheaper local businesses, but that's nowhere near a trend.

Serious question: Is it preferable to go to a national business that gives more money to the community than it takes and provides cheaper goods or a local business that gives no money to the community and provides more expensive goods?
posted by saeculorum at 8:54 AM on December 5, 2008

[Inasmuch as the question is answerable, citations that address the issue are a good thing. There's a strong thread of "let's just debate theory" developing here that's wandered a fair distance from that, which is getting to be a problem. You're welcome to have that discussion, but it needs to happen somewhere other than this askme thread.]
posted by cortex at 9:15 AM on December 5, 2008

Is it preferable to go to a national business that gives more money to the community than it takes and provides cheaper goods or a local business that gives no money to the community and provides more expensive goods?

All respect to cortex, but I don't think the question "is it preferable" is one that can be answered with citations, at least none other than the many already given. To me, that's a question about what you value -- a question about whether you want business owners and better jobs in a community, or just employees of businesses and lower-wage jobs; about whether you value the aesthetic and convenience and comfort experiences of shopping locally; about whether you value knowing people in your community or keeping/developing business skills and infrastructure in your community; about whether you value price above everything. Those value questions can only be answered at an individual level. If you start with a more specific goal - say, saving money out of your weekly paycheck - then you can say "which is the better choice - shopping locally or at a national chain" and your answer might be "shopping at the national chain" more often than not. But if you start with the goal of saving money out of your annual income, taxes included, then your answer might very likely shift to "shopping locally." But the point is not "which is better on a single measure," the point is that it is possible and perhaps advisable to take a larger view of the economy, a view that doesn't measure business success on a single measure but takes into account social, financial, and environmental impacts. When that broad lens is used and all impacts considered, large-scale enterprises don't fare as well in comparisons.

Patronizing local "for its own sake" sounds like it's arbitrary, but when the "own sake" of local really means all the quality-of-life and security gains that it does mean, then it is worth it, to some degree, for its own sake. The basic argument is that even in business, success and impact can't always or only be measured by dollars made or money saved, and that there is a legitimate view of the economy that starts by asserting a triple bottom line and considers a successful business one that is good for people, that is sustainable, that contributes to the community, and that makes money.

I understand the need to avoid threads that just turn into a debate, but the OP is asking as though he really wants to understand and evaluate the supporting arguments behind the "shop local" promotions, and these are all part of those arguments.
posted by Miko at 10:44 AM on December 5, 2008 [1 favorite has favorites]