Economics of "Buy Local"

by Levi A. Russell

This post originally appeared in the Ottawa Herald.

On March 7th, the Gwartney Institute hosted a debate on the Ottawa University campus. I won’t name my opponent, but the two of us debated the following resolution: “Buy Local” is a Bad Idea. My opponent has no problem with shopping at local stores; our disagreement was about the economic soundness of preferring local stores even when they don’t deliver low prices or superior quality.

In the debate, I defended the following idea: It makes good economic sense to support local businesses if we consider the possible risks associated with not buying local. By “local businesses,” I don’t necessarily mean small sole proprietorships located exclusively within a town. From my view, supporting big box stores and franchises in your community is an integral part of a sensible version of “buy local.” After all, the managers, employees, and franchise owners are also part of your local community!

Here’s why: commerce builds community, and community brings security. We don’t have to look far to see communities that have declined economically to the point that they are struggling to maintain basic services. Hospitals are closing, schools are turning into nursing homes, and home values are dropping in areas that once supported thriving communities. Is there something we can do to prevent this decline?

Certainly there are instances in which the economic factors that contribute to the decline of a town or community within a larger city are inevitable. However, this is not always the case. The presence of entertainment and retail businesses in a locality is as important as organized events to fostering an atmosphere of community. It’s difficult to keep or attract new residents when these businesses leave.

So, shopping at local stores isn’t just something you do to avoid buying gas more frequently. It’s an important part of keeping your community together. Even if you might pay a somewhat higher price or face a slightly narrower selection, support of these businesses is very much in your own interest.

Consider this simple example. If you and a large percentage of the people in your community buy all your jewelry in a different city or online, the local jewelry store may not be able to stay in business. That may be fine, you think, if you were able to get a good deal on the jewelry you purchased. What happens, though, if a piece of your jewelry breaks? Now you either have to go out of your way to get it fixed or mail it off. Simply put, local businesses provide services that cannot be replicated.

Even more importantly, local businesses ensure the continued provision of large-scale services in your community such as hospitals and schools. This support of large-scale services goes beyond paying taxes. When commerce dwindles in a community, people leave. When people leave, medical and educational services must be consolidated because they aren’t financially viable on a small scale. These consequences are as evident in many rural areas as they are in big cities like Detroit.

A crucial part of building and maintaining community is local commerce. If you are financially able, don’t let short-term convenience get in the way of your willingness to contribute to your community’s long-term stability.

Dr. Levi A. Russell is the Gwartney Institute Professor of Economic Education and Research at Ottawa University