In our opinion: 'Buy local' mentality may not work best in global economy

Published: Saturday, Aug. 18 2012 1:20 a.m. MDT

The "local first" movement is worthy of support on grounds that it seeks to encourage and benefit local entrepreneurship.

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Local businesses that compete with national chains are encouraging a "buy local" mindset among consumers, on the premise that when homegrown businesses prosper, so does the local economy. And a recent study suggests such a benefit may in fact exist.

The analysis was conducted on behalf of an organization that represents local enterprises, which the study claims return at least three times as much money to the Utah economy as do their competitors with national reach, headquartered somewhere else.

At face value, that's good news. There is no discounting the socioeconomic virtues of businesses owned and operated by people who live in the same community. But it doesn't necessarily justify a mandate for consumers to change their buying habits.

The analysis uses comparative data from transactions and reinvestment of revenue among national and local operations. News reports on the study don't offer details of its exact methodology, but one might presume the numbers skew the way they do because national companies recoup many overhead expenses elsewhere, while local businesses, on paper at least, keep more of that money at home.

But it should be noted that national companies also employ local people and contribute to the local tax base. Where a person spends discretionary income doesn't depend on whether their paycheck is written in Utah or somewhere else. At the end of the day, where consumers choose to plunk down their dollars will be influenced more by price, value and convenience than the provenance of the vendor.

It should also be pointed out that many "local" Utah companies harvest profits from sales out of state, and are therefore reliant on customers elsewhere who are OK buying "national."

Economic studies done independently of special interests offer a mixed bag on the question of whether "buy local" translates into more money for the locale in question. On the "pro" side, there is data suggesting revenues generated by businesses tend to "circulate" close to home. When a local business needs a plumber, they tend to call next door. That's not to say national firms don't hire local plumbers when sinks back up, but there is some credible evidence of a positive incremental impact in overall economic activity in the vicinity of locally-owned businesses.

But other studies point out that big box retailers offer significant benefits to local economies as a result of their ability to generally sell at lower prices. A consumer who saves money on a big purchase is likely to spend some of that money, for example, at a local restaurant. Hence, the value to the local economy of discount pricing by big chains also inures to the local economy in ways that may not be considered in the "local first" research.

Aside from the economics, there is clearly an element of civic pride and local identity that should be included in this discussion. Local businesses offer local flavor, a welcome departure from the homogenization of the modern American shopping mall where identical storefronts make it difficult to discern whether you are in Provo or Pittsburgh.

The "local first" movement is worthy of support on grounds that it seeks to encourage and benefit local entrepreneurship. But the issue is less about a booming local economy than boosting civic pride.

When people in Bentonville, Arkansas, shop at Walmart, they are no more buying "local" than are people in Utah who buy products from NuSkin International. In the modern global economy, when all is said and done, every business is a local business somewhere.

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