'Buy local,' but not the economics behind it

  • Article by: ERIC WIEFFERING , Star Tribune
  • Updated: January 8, 2011 - 10:01 PM

The best marketing campaigns skip past our head and land on our heart. In that regard, few have been as successful in recent years as the "buy local" movement springing up in metropolitan areas around the country.

The essence of what I'll call localism is this: Our economy will be stronger and our life richer if we spend more of our money at or with independently owned businesses in our own communities, even if it means paying higher prices.

The emotional appeal of that argument is undeniable. But the same rationale -- protecting jobs and standards of living for particular groups -- has been used for centuries to justify everything from punitive taxes on imports to Buy American mandates -- always at the expense of consumers.

Example: "voluntary" trade restrictions by Japanese carmakers in the 1980s. They didn't save the U.S. auto industry, notes author Todd Buchholz, but they boosted car prices by an average of $3,000.

I live in a neighborhood with many locally owned businesses, and I feel better when I am able to spend money with merchants I've come to know and trust. But to insist that those purchases are better for the economy than ones made at Best Buy or Target suggests a shaky grasp of economics.

The localism movement is a distinctly urban or small-town phenomenon, closely associated with the environmental and organic food movements. It began to coalesce two decades ago, out of efforts to block the arrival of Wal-Mart and other big-box retailers.

Few have been as vocal or effective in this fight as Stacy Mitchell, a Macalester College graduate and senior researcher with the Institute for Local Self-Reliance, which has offices in St. Paul and Washington.

In her 2006 book, "Big-Box Swindle," Mitchell likens Wal-Mart and its kin to the colonial economies of Europe, which were organized to extract wealth from local inhabitants, not improve their lives.

According to Mitchell, an analysis of 2007 census data shows that independent retailers have more employees per $10 million in sales than chains do, and also pay them better. When Wal-Mart or Barnes & Noble comes along, independent merchants and their employees suffer.

"The Wal-Martization of the economy is decimating the middle class," Mitchell said Thursday from her home in Maine. "We think we're really getting a great deal on that new DVD player, but are we shopping ourselves out of prosperity?"

Strangely, the localism movement seemed to pick up steam as the economy plunged into recession. A March 2009 blog post by Twin Cities retail consultant Cinda Baxter, urging consumers to spend at least $50 a month with three independent retailers, went viral and became Project 3/50.

In the Twin Cities, the most visible sign of the buy-local movement is the MetroIBA sticker in more than 200 retailers, up from 50 less than two years ago. Member John Hoeschen, owner of St. Paul Corner Drug, credits the organization for raising public awareness of independently owned businesses.

But has the buy-local movement helped save locally owned businesses? The evidence is inconclusive. A national survey of locally owned businesses found higher holiday sales among those that had participated in a buy-local campaign. That's encouraging, because consumers are better off when they have more choices.

U.S. census data through 2007, the latest available, are less encouraging. They show sales growing faster at chains, with independent retailers capturing just 28 percent of total retail sales, down from 31 percent in 2002.

The localism movement has done a great job of making consumers more aware of their choices, and of holding government accountable for playing favorites. The most persuasive part of Mitchell's argument is that, for too long, tax, zoning and development subsidies have benefited mass merchants at the expense of independents.

"All we'd like is a level playing field," said Dan Marshall, co-owner of Peapods, a natural toy and baby care store that just relocated to a larger space in St. Paul's St. Anthony Park neighborhood. "The Mall of America got millions in subsidies; the city didn't give us anything for our new building."

The chief failing of the localism movement is its willingness to downplay or ignore the economic gains that most of us currently enjoy. Living standards around the world are undeniably better now than they were half a century ago. Good economic policy, including free trade, is why.

Good economics might not be popular economics because there are always victims in dynamic economies, including individuals and entire industries.

The question the localism movement raises has been asked since the dawn of the industrial age: What's the cost of progress?

It's a question that deserves an answer. But in pining for something that may be lost, let's not overlook what has been gained.

ericw@startribune.com • 612-673-1736

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