Support for local businesses reaps benefits for everyone

What’s the best way of creating jobs and building a stronger economy in British Columbia?  Many economic development “experts” and political figures focus on attracting big business to set up shop through tax breaks and subsidies, even though the verdict of economists is that most of these jobs vanish quickly when another region or jurisdiction across the world offers more attractive incentives.  A better way to boost the economy – one that is entirely in our control – lies in our own wallets and shopping patterns.

That’s been the philosophy behind CUPE BC’s Ten Percent Shift campaign, which encourages consumers to “shift” ten percent of their spending to locally owned businesses and services. Studies all over North America have demonstrated how much additional economic activity is generated by making this simple shift in spending habits.

The Shift campaign has been partnering with Chambers of Commerce and the Canadian Federation of Independent Businesses, among others, to show business owners and consumers alike how important purchasing decisions are to local economies.

Cities on the West Coast of the United States like San Francisco, Portland, and Seattle have created an exemplary environment in recent years where independent businesses have flourished and expanded.  Not so in British Columbia.  Despite its “green” reputation, local purchasing in BC lags behind nearly every other province in Canada. 

This fact places a huge drag on the provincial economy, because there’s overwhelming evidence that the key to local prosperity is maximizing the presence of local business.  Here are four reasons why:

First, compared to equivalent chain businesses, local businesses spend more of their dollars locally, which pumps up what economists call the “multiplier effect.”  More than two dozen studies have shown that every dollar spent at a locally owned business generates two-to-four times the economic-development impacts as a dollar spent on an equivalent non-local business.  (No studies have shown superior impacts from chains.) Every dollar spent locally therefore means two-to-four times the local jobs, two-to-four times the local income and wealth effects, two-to-four times the local taxes, two-to-four times the local charitable contributions.

Second, a local business economy means that people running the businesses have a big stake in the community and are unlikely suddenly to move jobs to Mexico or Malaysia.  Whether or not every local business succeeds, every local entrepreneur is an important community resource, which lays the foundation for future local businesses being created and growing the local economy.  

Third, local control nurtures local culture.  What draws tourists are unique local restaurants, hotels, shops, and events.  That’s why the Austin, Texas, local business community uses the slogan, “Keep Austin Weird.”  Moreover, those especially attracted to a thriving local culture include the best and brightest in the country, the people economist Richard Florida calls the “creative class.”

Fourth, the presence of many diversified locally controlled businesses not only strengthens the economic multiplier but also other indicators of civic life.  We know, from a variety of sociology and political science studies, that local-business communities, where people are rooted and committed to civic life, tend to enjoy better public health, social equality, and democratic participation. 

Collectively, these four factors mean that local-business economies outperform global-business economies.  In 2010, in the Harvard Business Review, a graph appeared with the headline “More Small Firms Means More Jobs.”  The authors wrote, “Our research shows that regional economic growth is highly correlated with the presence of many small, entrepreneurial employers—not a few big ones.” 

A more recent study just published in the Economic Development Quarterly, a journal long supportive of business attraction practices, similarly finds:  “Economic growth models that control for other relevant factors reveal a positive relationship between density of locally owned firms and per capita income growth, but only for small (10-99 employees) firms, whereas the density of large (more than 500 workers) firms not owned locally has a negative effect.” 

This growing body of evidence has led a growing number of economic development professionals to dump their failed corporate attraction strategies and to focus instead on “economic gardening” or creating “living economies” through local businesses.  But a biggest part of this strategy must be done at the grassroots. 

That’s why more than 100 communities in North America have launched “buy local” or “local first” campaigns.  Here in British Columbia, the goal is a “10% shift.”

We consider this economic-development strategy so important for British Columbia that we’re organizing a two-day “Local Economy Summit” on February 13-14 to explore the strategies for the 10% shift.  Even this very modest change in consumer behaviour could create tens of thousands of new jobs in the provincial economy. For more information on the Summit—and to register—please go to www.localeconomysummit.com.

By Barry O’Neill and Michael H. Shuman, as appears in The Vancouver Sun January 22, 2013.

Barry O’Neill is President of CUPE BC. 

Michael H. Shuman is author of Local Dollars, Local Sense:  How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity (Chelsea Green, 2012).