Press-Republican

November 18, 2012

Small Business Saturday has impact

Colin Read, Everybody's Business
Press-Republican

---- — Next weekend we will celebrate Small Business Saturday across our nation.

If every day was Small Business Saturday, our region would be much stronger. Instead, when too-big-to-fail sneezes, small businesses catch pneumonia.

When George Bush bailed out big banks and insurance companies, and state governments indemnified civil servants, there seemed to be nobody looking out for small businesses. This oversight is ironic, given how many new jobs small businesses generate and how vulnerable they are to macroeconomic mismanagement of the follies of those too-big-to-fail and leaders more concerned about politics than prosperity.

I say “they,” but I confess for me it is a “we,” as my wife and I toil to develop a local wine industry. Like most small businesspeople, we do so not by seeking gifts from government but by the passion of entrepreneurship and the sweat of our brow.

Every small businessperson ponders the larger economy, and must be wise to succeed. The Walmarts and the bulk outlets will always have an advantage in cost. For commodities like cheap cheese and inexpensive wine and beer, mass-produced shoes and clothes made in China, the bulk outlets serve a role in our economy.

I don’t begrudge them. If people can save money on those things for which quality of product or service matters little, our household budget goes farther, which allows us savings to afford the occasional higher quality product that we might not otherwise consider.

Walmart and outlet stores have commodified much of what we buy. We have no expectation of good service or product knowledge. And, the large profits large stores generate that often leave our county are a price we can ill-afford.

Buying local means buying a level of service that large outlets have all but forgotten. It also returns a hidden dividend. When you buy local, you may pay a very small bit more for local knowledge, for a proprietor that cares about you and insists you are always right, and for someone interested in filling your product needs that might otherwise go unmet.

Buying local also pays an additional dividend. When you buy local, you are often buying a product that is grown or made in this area. Almost all the costs of producing the local good remain in our community. And, the income you generate for the proprietor also stays local.

Here’s an example. Consider a local shop that sells a locally produced good compared to a shop that predominantly sells a high-volume of goods produced outside our county. A $50 purchase by 1,000 customers each year in each shop meets $50,000 of our shopping needs. Of that $50,000, the high-volume outlet filled with goods produced elsewhere leaves about $12,000 in our local economy. That number even includes the fact that their locally employed workforce will purchase some local goods with their wages.

However, the same $50,000 expenditure in a shop that sells goods produced locally leaves more than six times that amount, or almost $76,000, in our Clinton County economy, in direct spending and in the spending of all those who depend on the wages arising from local production.

That difference means more than four times the jobs are ultimately produced locally, our economy is more vibrant and sustainable, and our taxes are spread over a larger workforce. It means our children have jobs, and we enjoy economic diversity.

All is not lost when we send that difference, a $64,000 dividend for $50,000 of spending, to other areas. Bentonville, Ark., and China benefit significantly when we purchase from Walmart, and California benefits when we buy goods produced there. Our economic failure is their gain.

Before I made these calculations, I had no idea just how much is lost when we purchase outside our region. 

Unfortunately, frugal commodified consumerism may be penny-wise but pound foolish. On Small Business Saturday, or, better yet, every day, ask yourself first if it is possible to buy something produced locally rather than from outside our county. If the answer is no, ask next if your purchase is from a shop that keeps most of their income in the county. The greater the local content, in product or in service, the more that will return to you, your family and your friends. Buying local really does make a difference.

Do you know anyone unemployed? If we “think big and shop small” when we can, this economy will thrive and unemployment will be a bad memory.

Colin Read contributes to Bloomberg.com and has published eight books with MacMillan Palgrave Press. He chairs the Department of Finance and Economics at SUNY Plattsburgh.