The Economic Rationale for Buying Local Across Sectors
In today’s globalised economy, consumers and businesses face the decision of whether to support local providers or opt for products and services from larger, often international, corporations. While global brands can offer cost advantages or brand recognition, the economic rationale for buying local is powerful, with benefits that extend well beyond immediate transactions.
- Strengthening the Local Economy: The Multiplier Effect
One of the most compelling reasons to buy local is its impact on the local economy. When consumers and businesses spend money with locally owned companies, that money is more likely to stay within the community. This phenomenon, known as the economic multiplier effect, ensures that local spending circulates through the local economy, benefiting more than just the initial business.
Research has shown that locally owned businesses have an economic multiplier effect of around 1.8. This means that for every dollar spent at a locally owned firm, $1.80 is generated in the local economy. In contrast, businesses that only have a local office but are owned elsewhere typically have a multiplier effect closer to 1.3. This lower multiplier occurs because profits are often extracted from the community and sent back to the corporation’s headquarters, reducing the overall economic benefit to the area.
For example, when a local retailer buys supplies from a nearby manufacturer, the manufacturer then hires local workers and purchases other goods and services from within the community. This chain reaction boosts local employment, income, and economic activity. In contrast, when money is spent at a branch of a multinational corporation, a significant portion of that revenue may leave the local economy, resulting in economic leakage and limiting the positive impact on the community.
- Job Creation vs. Job Retention: A Critical Distinction
While global corporations can create jobs by opening local offices, there is a critical distinction between merely creating jobs and retaining wealth within the community. Locally owned businesses are more likely to employ local residents, invest in the long-term success of their employees, and reinvest profits into the local economy. These businesses are deeply rooted in the community and have a vested interest in its prosperity.
In contrast, global companies that establish local offices might prioritise cost-cutting measures, such as outsourcing or automation, which can lead to job losses or reduced economic impact over time. While these companies can create jobs, they may not offer the same level of community engagement or long-term economic benefits as locally owned firms.
- Real-World Examples: Cities Embracing Localism
Several cities around the world have successfully implemented policies to support local businesses and maximise the economic benefits of buying local.
Portland, Oregon: Portland has been a leader in the buy-local movement, with policies and programs that encourage residents and businesses to support locally owned enterprises. The city’s emphasis on localism has led to a thriving small business community, with a strong emphasis on sustainability and local culture. Portland’s experience demonstrates how supporting local businesses can create a vibrant economy that is resilient to economic downturns.
Cleveland, Ohio: The Cleveland Foundation’s “Greater University Circle Initiative” is an example of how localism can drive economic revitalisation. By leveraging the purchasing power of local institutions like universities and hospitals, the initiative has created opportunities for local businesses and entrepreneurs, leading to significant economic and social benefits for the community.
Barcelona, Spain: Barcelona has prioritised local businesses through urban planning and policies that support small retailers and service providers. The city’s efforts to preserve its unique local culture and economy have made it a global example of how cities can thrive by focusing on localism.
These cities illustrate the potential of localism to foster economic resilience, community engagement, and cultural preservation. They show that when local businesses are supported and prioritised, the benefits ripple throughout the entire community.
- The Risks of a Global-Only Approach
Focusing solely on attracting global companies to create jobs can be a short-sighted strategy that overlooks the long-term economic health of the community. While global companies can bring investment and employment opportunities, they often lack the deep ties to the community that locally owned businesses have. This can lead to a situation where profits are extracted from the community, economic benefits are short-lived, and the local economy becomes dependent on external forces.
Moreover, global companies may be more likely to relocate operations to other regions or countries in search of lower costs, leaving the local economy vulnerable to job losses and economic instability. In contrast, locally owned businesses are more likely to remain committed to their communities, even during economic downturns, because their success is directly tied to the local economy.
- The Broader Impact: Cultural and Environmental Considerations
Beyond the direct economic benefits, buying local also has positive cultural and environmental impacts. Locally owned businesses often reflect the unique character and heritage of their communities, contributing to a vibrant and diverse local culture. This cultural richness can attract tourism, support creative industries, and enhance the quality of life for residents.
Environmentally, locally sourced products and services typically require less transportation, reducing carbon emissions and other environmental costs. Local businesses are also more likely to adopt sustainable practices that are in harmony with the local environment, further contributing to the community’s well-being.
The decision to buy local is more than just a preference; it’s a strategic choice that can drive sustainable economic growth, create jobs, and strengthen communities. By supporting locally owned businesses, consumers and organisations can ensure that their spending has a positive and lasting impact on their local economy. This approach not only benefits the community today but also builds a foundation for future prosperity and resilience.
In an increasingly globalised world, the importance of localism cannot be overstated. Whether it’s through policy initiatives, consumer choices, or corporate responsibility, embracing localism is key to creating a more equitable, sustainable, and vibrant economy. The examples of cities like Portland, Cleveland, and Barcelona show that when local businesses thrive, so too do their communities, providing a model for other regions to follow.
The economic rationale for buying local is clear: it supports a healthy economy, preserves local culture, and ensures that the benefits of economic activity remain within the community, creating a virtuous cycle of growth and prosperity.
