The need for Local First campaigns

Global Companies: Local Economies

The last two decades have seen sweeping changes take place in many American communities as big-box retailers and strip malls in once green pastures replaced the traditional locally owned shops on Main Street. Meanwhile, many local governments spent tremendous amounts of time and money trying to attract multinational corporations to build factories in their backyards. Unlike the owners of locally based businesses, the absentee shareholder owners of these new businesses have little knowledge of or concern for the consequences at the local level for action taken on behalf of the corporation (David Korten, Economies for Life, YES!, Fall 2002). Today we can see the tremendous impact global companies have had on local economies as decisions affecting local jobs, wages, and quality of life are made in distant boardrooms.

Communities have encouraged the expansion of national retailers based on the promise of job creation and sales tax generation. However, consumer spending is a relatively fixed pie. Sales gains at a new shopping development are invariably offset by losses at existing businesses. It's "a zero-sum game" according to Kenneth Stone of Iowa State University, who for more than a decade has tracked Wal-Mart's, and more recently Home Depot's, impact in Iowa. As local stores lose sales, they either downsize or close. The resulting job losses typically equal or even exceed the gains at the new superstore. The new jobs at Target or Wal-Mart, moreover, often pay less and offer fewer benefits than the jobs they replace. Taxpayers end up picking up the difference. Half of Wal-Mart's workers qualify for food stamps. Washington State reports that "Wal-Mart employees are the largest group of users in its taxpayer-funded low-income health care program" (Stacy Mitchell, Main Street News, February 2004).

Furthermore, In 1997 more than 40 states offered property tax abatements, loans for machinery and equipment, state revenue bond financing, accelerated depreciation, and special funds as incentives to help cities make deals (Michael Shuman, Going Local). Multinational corporations are mobile, however, and to cut expenses they increasingly move, leaving behind a trail of unemployment, abandoned property, and a diminished tax base. Local government is often left paying for the damage - in the form of unemployment compensation, higher welfare payouts, and diminished property taxes.

Money Spent Locally Stays Local

Several studies have shown that money spent at a locally owned business stays in the local economy and continues to strengthen the economic base of the community. A 2002 case study in Austin, Texas, showed that for every $100 in consumer spending at a national bookstore in Austin, the local economic impact was only $13. The same amount spent at locally based bookstores yielded $45, or more than three times the local economic impact (Civic Economics, Austin Unchained, October 2003).

A 2003 case study of Midcoast Maine covering several lines of goods and services validated these findings. The study surveyed eight locally owned Maine businesses, and found that the businesses spent 44.6 percent of their revenue within the surrounding two counties. They spent another 8.7 percent elsewhere in the state of Maine. The four largest components of this local spending were wages and benefits paid to local employees, goods and services purchased from other local businesses, profits that accrued to local owners, and taxes paid to local and state government. All eight businesses banked locally, used local accountants, advertised in local businesses publications, purchased inventory from local manufacturers, and used local Internet service providers and repair people. The study estimated that a big-box retailer returns just 14.1 percent of its revenue to the local economy, mostly in the form of payroll. The rest leaves the state, flowing to out-of-state suppliers and back to corporate headquarters (The Economic Impact of Locally Owned Business vs. Chains: A Case Study in Midcoast Maine, New Rules Project, September 2003).

Local Owners Are Local Contributors

There are other benefits to buying local as well. Research has shown that small local businesses make indispensable contributions to communities and neighborhoods. A study of businesses in Oregon detailing charitable giving showed that when in-kind contributions were included, small firms gave an average of $789 per employee, medium-sized firms $172, and large firms $334 (NFIB Small Business Policy Guide). Additionally, large firms contribute primarily to the area where the corporation is headquartered, not necessarily where they do business.

Local Businesses Offer Stable Employment

Small businesses account for the largest share of net new jobs generated each year, and locally based business provide some of the most stable employment opportunities in a community. For all their economic power, the number of jobs provided by global corporations relative to the world's workforce is small. The 200 largest corporations in the world employ less than one percent of the global workforce although they account for about 30 percent of global economic activity. Between 1983 and 1999 the number of people they employed grew by 14 percent while their profits grew more than 360 percent. Most job growth comes from local independent businesses (Korten).

Local Ownership Lessens Environmental Impact

In addition to building a strong economic base, supporting the local community, and creating new jobs, small businesses, which are more often located in central business districts, have less impact on local ecosystems compared to larger retailers located in strip malls or stand-alone buildings. To accommodate large retail development, roads and parking lots must be built, which results in a greater reliance on cars and an increase in auto emissions. As big-box stores and chain retailers consume more and more undeveloped land, polluted runoff from their parking lots is placing an ever-greater burden on the continent's rivers, lakes, and coastal waters. One way to preserve a community's land and natural resources is to channel retail activity back into downtowns and neighborhood shops. Multistory buildings reduce the footprint of buildings. Higher densities and greater access for pedestrians and public transit mean significantly less land devoted to roads and parking lots (New Rules Project, Home Town Advantage Bulletin, September 2003).

Tax Revenue Goes Further

Local businesses in town centers also require comparatively little infrastructure investment and make more efficient use of public services. The taxes paid by large retailers often do not cover the increase in public services that are required and the difference can be dramatic, according to a recent study of Barnstable, Massachusetts, a city of 48,000 people. The study, conducted by Tischler & Associates, compared public revenue and costs for various land uses. It found that the city's small downtown stores generate a net annual surplus (tax revenue minus costs) of $326 per 1,000 square feet. Big-box stores, strip shopping centers, and fast-food outlets, however, require more in services than they produce in revenue. A big-box store creates an annual tax deficit of $468 per 1,000 square feet (Stacy Mitchell, Main Street News, Feb 2004).

Independent Businesses Maintain Uniqueness

Additionally, an economy of diverse, unique businesses attracts today's skilled workers and investors who can choose to settle and grow businesses anywhere. In his research, Richard Florida, author of The Rise of the Creative Class, shows that today's creative workers are choosing to settle in places that preserve their distinctive character. And Richard Moe, president of the National Trust for Historic Preservation, says these one-of-a-kind communities attract tourists as well: "... when people go on vacation, they generally seek out destinations that offer them the sense of being Someplace, not just Anyplace." They aren't interested in visiting communities that have transformed themselves into a sad hodgepodge of cookie-cutter housing tracts, cluttered commercial strips, and bleak downtowns.

Michelle and Derek Long, Sustainable Connections, Bellingham, Washington.