Monday, October 06, 2003

A Case for Localisation

In today's world, if you don't preach and accept "globalisation" as the contemporary religious doctrine, it is being equivalent to being a heretic.

But there are valid reasons for Going Local, as these excerpts from an article by Michael Shuman describes:

"When you buy groceries or clothes or gasoline, you usually focus on only two
questions: Which stores have the lowest prices? And which are most conveniently
located? More and more of us then decide to do shopping at super-discount department
stores like Wal-Mart. Whatever their virtues, however, these stores systematically suck
money out of town and put traditional small retailers out of business.

There are at least four compelling economic reasons to buy instead from locally
owned businesses:

First, a locally owned business is likely to produce income, jobs, tax receipts, and
charitable donations for a community over several generations. Whenever ownership
coincides with the location of a business, all these transactions reinforce one another and
pump up the local economic multiplier, the basic building block for community

Second, local ownership minimizes the chance of calamity. Across the country,
cities have seen their best local companies sell their interests to outsiders and then their
hometown plants shutdown. Tragic consequences always follow. Taxpayers thrown out
of work become tax-drainers through welfare and unemployment payments. When the
tax base contracts, vital services like education, police, and fire must be cut. Property
values plummet and, like so many steel and auto towns in the 1970s and 1980s, the
community descends into an economic death spiral. Local stores have no plans to move
to Malaysia.

A third advantage of local ownership is that once a company agrees to stay
indefinitely, the community can better shape its laws and regulations to serve the local
quality of life. Today, most communities are held hostage to their largest companies.
Near where I live, on the Eastern Shore of Maryland, for example, Tyson and Perdue
have successfully fought all legislative efforts to raise wages of their workers and to clean
up the billions of pounds of chicken manure they dump into the Chesapeake Bay
ecosystem. They deploy one powerful argument: Regulate us and we’ll move to more
lax jurisdictions like Georgia or Arkansas...

Finally, locally owned businesses are, in fact, more likely to succeed than those
with absentee shareholders. In 1975 the Sperry Rand Co. decided to shut down any
subsidiaries that were not achieving a 22 percent rate of return. One of its companies
slated to get the axe was the Library Bureau, the principal employer of Herkimer, New
York. The workers, residents, and local banks decided to execute a buyout. In its first
year of operation under new management, the newly independent Library Bureau earned
a 17 percent rate of return – inadequate for Sperry Rand, but more than enough for
Herkimer. It continued to perform profitably for more than a decade.

The Herkimer example underscores that locally owned businesses have much
more flexibility and time to become profitable. Having locally owned businesses
generate a positive rate of return is far more important to the local economy than having a
smaller number absentee-owned companies generating a maximum rate of return. This
helps explain why college and state-government towns are among the most recessionproof
in the country.

The bottom line is this: If you’re hungry, choose a locally owned restaurant. If
you need fresh produce, check out the farmers’ market. If you’re a business, buy inputs
for your company from local suppliers. The real power to shape your economy lies in the
hands of residents like yourself....

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