ECONOMY: The Competitiveness of Local Living Economies by Michael Shuman


Economic localization offers the key to solving a growing number of global problems, including peak oil, climate disruption, and financial meltdowns.  Yet the perception remains that this solution is very costly, because local goods and services supposedly are more expensive than their global alternatives.  American consumers are convinced that "big-box" stores and bigger businesses mean lower prices–"always," in the Wal-Mart vernacular.  And not a few localization activists concur, arguing that consumers should nevertheless be prepared to pay more to responsibly avert the calamities of a carbon-dependent world.

In fact, local goods and services are already competing remarkably well in the marketplace—and they are likely to do better in the near future. This chapter lays out why cost effectiveness actually is a reason to embrace localization and argues that the only thing standing in the way of localization flourishing is, oddly, policy-makers committed to propping up increasingly noncompetitive global corporations.

A Local Living Economy

Ever since 2001, when the Business Alliance for Local Living Economies (BALLE) was founded, the term “local living economy” has become shorthand for a pragmatic approach to localization. Two principles lie at its core:

  1. The wealthiest communities are those with the highest percentage of jobs in businesses that are locally owned. A growing body of evidence suggests that local ownership in businesses pumps up the multiplier effect of every local dollar spent, which increases local income, wealth, jobs, taxes, charitable contributions, economic development, tourism, and entrepreneurship.
  2. The wealthiest communities are those that maximize local self-reliance. This doesn’t mean that they cut themselves off from global trade. But they rely on trade only for the diminishing universe of goods and services that they cannot competitively provide for themselves.

Both principles would be very difficult to vindicate, if not impossible, were global businesses ultimately more competitive than local ones. If the scale of business has to be large for them to compete, then it would be difficult for communities to embrace locally owned firms, because larger-scale businesses require global pools of owners. Nor could communities possibly achieve greater self-reliance, because larger-scale businesses imply greater reliance on trade. Fortunately, there’s powerful evidence that local businesses in the United States are already quite competitive—and likely to become more so in the years ahead.

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