Making the Case for Local Economies

These thoughts are all part of the invisible structures of permaculture, and are inspired by the Transition Network, The New Economics Foundation and Michael Shuman's book called 'Local Dollars, Local Sense-  How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity' which was published by Chelsea Green in 2012.

The New Economics Foundation (NEF), which is 'the UK's leading think tank promoting social, economic and environmental justice', says that many small town economies  are depressed because the money that goes into them leaks out. The problem is not that there is limited money, but that the money that goes into a community is spent on products and services that aren't local, so that money immediately leaves the area. NEF uses the leaky bucket metaphor which is illustrated below by the The Transition Network.

NEF says that part of changing the local economy is to develop the strengths of the community, and find out what skills, resources and passions can fill economic niches. "The principle behind this approach is that people who live and work in a place, and others who care about its future, are best positioned to find enterprising solutions, implement them and reap the rewards." NEF 

In his case for local small businesses Shuman points to the following:
  • Recent studies show that small locally owned (10-88 employees) businesses are correlated to per capita income growth while large business (more than 500 employees) that are not owned locally have a negative effect on income growth in the local community.
  • Locally owned businesses help to decide the future of the community, as opposed to outside influences that don't live and work in the community.
  • Bruce Seifer,  who led economic planning in Vermont and co-authored the book: Sustainable Communities: Creating a Durable Local Economy,  says that a local businesses spend more money locally, hire locally, source materials locally, work with other local businesses,  donate to charity, volunteer, mentor, train and when things get tough, they are more likely to stay in town.
  • Politicians are often interested in attracting big business to town, but "are all too likely to guess wrong about which industries are worth attracting.  What's more, large corporations often generate little employment growth even if they are doing well." (pg 16 Local Dollars, Local Sense, Shuman)
Velocult- and awesome bike store and staging area for group rides in PDX
Bonus points for anyone who spotted the disco ball in this picture.

"Local enterprises are more likely to employ local people, provide services to improve the local quality of life, spend money locally and so circulate wealth in the community, promote community cohesion and, by reducing transportation of goods from across communities, are likely to have a smaller environmental footprint." The New Economics Foundation

Shuman goes on to say that there are three rules to help local economies:

"Rule 1. Maximize the percentage of jobs in your local economy that exist in businesses that are locally owned.
Rule 2.  Maximize the diversity of your businesses in your community, so that your economy is as self-reliant and resilient as possible.
Rule 3. Prioritize spreading and replicating local business models with outstanding labor and environmental practices." (pg 17 Local Dollars, Local Sense, Shuman)

The Community Cycling Center- another great social enterprise and bike shop in PDX

Shuman's local economy rules are all about making local connections within the community.  Re-weaving the intricate relationships between businesses, neighbours, families and place.  Finding where the obvious needs and gaps are within the communities, and supporting livelihoods around those gaps. Supporting people who have the passion, skills and talent to fill economic and social shortfalls within the community. Finding small, intensive models and then replicating them.

This idea is beautifully illustrated in The Local Entrepreneur Forum in Totnes UK, where they have day every year where local entrepreneurs pitch their ideas and people in the community pledge time, money and skills to help start the businesses.  For example, in 2013 the New Lion Brewery (local craft brewery), and  Fungi Futures (they take spent coffee grains from coffee shops in Totnes and grow gourmet mushrooms that they sell to restaurants), along with other businesses pitched for help from the community.  For the 2014 Local Entrepreneur Forum the New Lion Brewery produced a Circular Stout.  Circular because, Fungi Futures grew oyster mushrooms on the spent grains from the brewery and the brewery used the oyster mushrooms to flavour the beer.  Now that's a feedback loop that creates useful products and revenue streams from making connections within the community.

Visiting Across the Creek Organics during the Permberton Slow Food Cycle 

Local Multiplier Effect

One of the reasons to support local businesses in the community is the idea of the local economic multiplier effect. "Every job in a locally owned business generates two to four times as much economic-development benefit as a job in a equivalent non local business." (pg 18 Local Dollars, Local Sense, Shuman). The more times a given dollar will circulate through the community without leaking out, the more income, jobs and prosperity are generated in a community. It's not just what you spend your money on, but what the next person does with that money. For example a local economic study in Austin, Texas, found that for $100 spent in local bookstores, $45 remained in the local economy.  For the same $100 spent in a chain bookstore, only $13 remained in the local economy.  A study in Tayside showed that tourists in hotels spent 70% more than tourists that stayed in B&B's.  However, the total local income was higher from the B&Bs because most of the money spent on the hotels was immediately leaked out the the local economy to the larger franchise and executives that live elsewhere.

"Suppose you paint a pound coin red and watch where it goes. Every time it changes hands within a community, it means income for a local person. The more times it changes hands, the better for that community. In fact, money that is re-spent in a local area is the same as attracting new money into that area. Either way, it is new money into the hands of the person who receives it. This is termed the local multiplier." NEF

This is also why communities start community currencies, so that local dollars are tied to a community and can't leak out.

Linnaea Farm Booth at the Farmer's Market, Cortes Island, BC

Value vs Price

Many people see large chain stores as a big boon to communities as they provide products at cheaper prices.  However, price is not the only thing that is a decision factor in people buying services or products.  People judge the value of the product/service and value is not the same as price.  For example: what is the quality, how trustworthy is the producer, how interesting is the shopping experience, how does the company treat its employees and the environment, does the company support the local gymnastics club, does the company employ my neighbour/friends/family....   In addition, local businesses that provide services often have a better level of expertise and knowledge of the local conditions, people and environment than a large outside company.  Shuman says that local businesses usually have the following benefits for the community: higher standards, greater wealth, greater stability, better community planning, stronger identity, greater creativity, greater social well-being, greater political participation.

Mason Street Farm, Urban Farm in Victoria, BC

Energy Impacts on local business

If you do a energy resiliency assessment of your community, you might find that if energy prices rise, competitiveness of local businesses also increases, especially for food, building materials and local energy production.  Non-durable goods tend to have less value per weight, so as energy prices go higher, there is less and less of a case to import them and more of a case to produce them locally.  The most apparent of this trend is food.  The local food movement is growing, not just because of health reasons, environmental reasons or social justice issues, but because with climate change, reliance on petroleum products and unsustainable farming practices, imported food is becoming increasingly expensive.  Other examples where local businesses might become more competitive with rising energy prices are in building materials, textiles and lumber.  Another local business niche that I see becoming more important in upcoming years is retrofitting buildings to become more energy efficient and creating community energy projects.

Alastair Helestine  leading a weaving workshop at Linnaea Farm

So in the interest of walking the talk, I have started a natural, edible landscape design business in Creston called Aurora Edible Designs. I hope to be part of revitalization of this small local economy as well as creating beautiful, regenerative, living landscapes.

"beautiful places, places where you feel yourself, places where you feel alive." -Christopher Alexander, A Pattern Language


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