Buying Local Is the Key to Strong Regional Economies

June 24, 2016

NOTE: Images in this archived article have been removed.

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In the leaky bucket analogy for local economies, money flows into a region to circulate through local businesses like water into a bucket. Water that leaks out is money that escapes the local economy to pay for imports. The more watertight the bucket, the more wealth retained.

In the early 1980s, unemployment rose steeply in Lane County, Oregon, because of a downturn in the once-dominant timber industry. The Neighborhood Economic Development Organization (NEDCO) in Eugene, Oregon, was trying to respond by funding job-training programs, but no new jobs were open and it seemed like pouring money into a bottomless bucket. Government economic development efforts focused on tax breaks and other financial incentives in a failed attempt to lure corporations to the region.

Alana Probst, who directed NEDCO, began to develop a different approach, one that would work to plug the leaks. Here’s how Jane Jacobs described the approach in Systems of Survival:

Her idea was simple: Go to several businesses and ask what they were planning to buy from outside the city and county in the coming year. Then immediately see if there were local businesses capable of putting in bids for the work. In the meantime, while those searches were being made and bids prepared, visit more purchasers, start seeking potential suppliers for their items, and so on. In short, the program was to be made up as it went along. No expensive studies that would be obsolete before they were finished. She put together a grant of thirty-eight thousand dollars from the city and county governments and a local bank so she and a staff of two could try the scheme.

The Buy Eugene initiative, which started by asking ten businesses to each list forty items they were importing, quickly built up an impressive resumé as a local matchmaker. It proved its worth within the first year by creating 14 new local contracts for work formerly done elsewhere, replacing $500,000 of imported purchases, creating 90 new jobs and saving local purchasers about $125,000.

In the beginning of the first year of operations, Buy Eugene discovered that many local manufacturers were not buying from each other even though prices were, in many instances, significantly cheaper. Traditional relationships held fast because many small and/or new firms lacked either the marketing capacity or a purchasing department capable of securing more effective contracts.

Buy Eugene intervened in this process by providing a broker that would A) work with a purchaser to formally document their product needs, B) conduct an extensive search of businesses that might meet that need, C) collect and submit bids to the purchaser, and D) keep information flowing between the purchaser and potential suppliers, to enhance the chances of a successful match. For this facilitation, Buy Eugene collected a small fee. —Marc Bouvier, Rain Magazine

The initiative encouraged Eugene’s citizens and its business owners to imagine what was possible, rather than what wasn’t working. Its success can be measured in contracts written, jobs gained, and money saved—and also in the number of great import replacement stories created. For example:

An airplane catering company was able to redirect procurement to a newly formed cooperative chicken-processing facility rather than importing chicken from Arkansas.

A local printer started producing forms for the local television station to replace those previously shipped in from Southern California. The printer then began supplying the forms to television stations across the state.

The marching band for the University of Oregon ordered their new uniforms, not from a New England catalogue but from a new Eugene collaborative business that combined the skills and resources of a costume designer, a small-scale clothing manufacturer, and a producer of lightweight waterproof materials to develop a uniform designed for the Oregon climate.

Buy Eugene caught the attention of harried legislators and tax payers across the state of Oregon, and in 1986 a network of similar agencies, dubbed “Oregon Marketplace,” was launched by the Oregon Department of Economic Development.

Probst said Buy Eugene’s greatest contribution was to set an example of a community looking within for solutions to its economic problems and then taking risks together.

Spurred by a growing appreciation for local food, citizens, businesses, non-profits, and governmental organizations have begun to work together to build regional food systems. But what else might be sourced locally? What can citizens do to thwart the leaky bucket syndrome of their own local economies?

In the Berkshires we are thinking of wool, furniture, and energy in addition to food. In the spirit of the Buy Eugene program, the Schumacher Center and BerkShares, Inc. are joining with members of the Chamber of Commerce, community bankers, government officials, and philanthropists to develop the tools, networks, and culture that will unite existing economic development efforts in our home region under an ethos of import replacement. Our goal is to turn “supply chains” into “supply loops” and allow “community supported industry” to flourish.

We are recording our adventures on our website, building our toolkit of applied programs, and sharing what we learn as we go.

Susan Witt

Susan Witt is the Executive Director of the Schumacher Center for a New Economics, which she co-founded with Robert Swann in 1980. She has led the development of the Schumacher Center’s highly regarded publications, library, seminars, and other educational programs, which established the Center as a pioneering voice for an economics shaped by social and ecological principles. Deeply engaged with the history and theory of a new economics and its... Read more.

Tags: building resilient economies, new economy