The Multiplier Effect of Buying Local
Let’s say it’s Thursday morning and you get a knock on your door. Your Mother Earth Food box has arrived! You open it up and look inside. Donut peaches, cherry tomatoes, red kale, cucumbers, bell peppers, green beans, and salad mix all from local farmers in your community.
When you support a local business, such as Mother Earth Food that buys from other local businesses, what is the effect of each dollar spent? In the above example, my farm (Greenshine Farms) provided the salad mix for this particular box of goods. That money then went towards expenses such as compost, fertilizer, car repairs, rent, groceries, etc. all purchased from small businesses/individuals in my community. In addition to inventory and maintenance, it also went towards employees who also went on to spend money within the community.
It may seem insignificant at first, that a mere $28 (the cost of the box) spent with a local business could have any effect at all. However when you account for the multiplier effect that such capital has on a local economy, the ‘new’ revenue created as a result of that initial spending can start to add up quick.
As mentioned, I purchased compost from a local yard that makes it with food and landscape waste from local restaurants. This money employs machine operators, drivers, and provides a living to the owner, all members of the community. Furthermore, this business creates a product that provides work to dump truck drivers, garden centers, and other mulch yards who use it in their own blends.
Let’s assume the work crew goes out for burgers after work at a local brewery. The burgers are made with buns from a local bakery, grass fed beef from a local rancher, and ironically, lettuce from Greenshine Farms. The cycle repeats. As you can see, the multiplier effect of this original money spent creates vast ripples throughout the local economy, especially when that money is used to support goods and services that originate within the community.
On the other hand let’s assume that the original customer in this equation decided to take their money to the one of the big chain grocery stores in the area. Such a grocer is providing jobs to people in the community, but in terms of purchasing inventory for their stores, the majority of their revenue is being used to support big farms and distributors out west. Once that money leaves the community it rarely comes back. It gets consolidated among a few wealthy individuals (namely the owners of these large companies) and has little to no effect on the local economy where that store is located.
A 2009 New Orleans study conducted by Civil Economics compared the square footage of a Target supercenter with an equal amount of commercial space on Magazine Street. It found that, “sales revenues (and tax revenue) were double that produced by the Target, and the recirculating of money within the community was more than four times greater.” (The Civic Economics of Retail, Studies 2002–2012, pg.10)
Unless we wish to live in a world dominated by massive distribution centers and big chain retailers (95% of inventory being produced overseas), we need to make an effort to support the producers in our local community. This will not only lead to better resilience in times of economic downturn, but will also often times provide the consumer with an overall higher quality product at a minimal price difference.
Written by Rand Gifford
