Buy local, eh?

Unfortunately for the 85 ski areas in Quebec, hard-earned Canadian dollars are being transported out of the province--even worse--out of the country and being spent in a foreign land.  That would be Vermont, with Canadians taking advantage of the cheap currency south of the (Canadian) border. 

The Freeps reports, and includes this statistic, which I find hard to believe:

Smuggler’s Notch Marketing Director Nancy Illemann said that 85 percent of last week’s overnight visitors were from Canada.

I thought all the Canadians were in Florida this time of year.  Guess not.

We don't hear a peep of protest from the Canadian "buy local" folks.  If they exist, and they are like the Vermont crowd, they would argue that the best use of Canadians'  dollars is to spend them in the province.  After all, why ski in Vermont if there are ski areas in Quebec?   If that's true for Canadians it is also true for Vermonters. We should all ski at home.

The buy local folks have a curiously assymetrical view of economic activity. It's great for Vermont firms to sell products out of state. We celebrate Ben and Jerry's, IBM, GE, and many other firms located within our borders.  But to them, it's not good for Vermonters to buy products produced outside of our borders.  The illogic of these two statements should be clear to anyone.   As David Ricardo noted long ago, trade produces wealth.  Trying to be  as self sufficient as possible produces poverty.  That's as true for Canadians as it is for Vermonters.

Comments

[Dennis Lukas]

Hey Art, what about those foreign workers, Vermont ski resorts hire each year that pay us no taxes but take away local jobs??????

[Sheldon Katz]

Art-fully crafted as usual. But do we really need the rest of the world, or even the rest of the country? Just think how cheap IBM semiconductors would be to all of Vermont's OEMs if IBM would limit its sales to Vermont. And the electronics products of that multitude of OEMs would be soooo cheap for us Vermont consumers -- they would practically be giving them away. And without demand from Canada, CT, NJ, MA, NY, PA et al, the ski resorts would definitely reduce their prices.

Art, you have solved inflation. You'll get a Nobel for sure!

[Cairn Cross]

Art all I can tell you is that when I stayed last Thursday night at Bolton Valley before the Peak Pitch event on Friday the entire bar was filled with Canadians virtually all of whom were staying at the resort. There were few Americans spending the night.

[John Cueman]

Hey Dennis Lucas! I got news for you. Ski resorts hire internationals because they can't find locals to work anymore. If you are hiding some good local workers, send them down to Bromley, we'll take em' in a heart beat!!

[Michael Shuman]

Art, it's your argument that’s illogical – and it’s also clear you don’t really understand localization.

You should concede, to begin with, that it’s undeniably true that if Canadians skied locally, their own economy would benefit enormously. The reason is the economic multiplier. From a community perspective, money spent outside one’s community yields zero local economic benefit.

You then ridicule your fellow Vermonters for loving local but profiting from globally minded Canadians. But economic logic suggests that the strongest community is one in which local businesses maximize sales to local markets and maximize sales to global markets. Local production and global production together produce wealth. Take away either, and an economy suffers. That you encourage communities in Vermont not to favor local markets – the markets that generate the highest multipliers of income, wealth, jobs, and tax receipts – actually condemns them to poverty. And this in a state filled with rural economies that are largely about local markets!

You appear unaware that localization advocates seek two very different goals: Increase the number of locally owned businesses in one’s own community, whether the firms sell local or global. And nurture them through “Local First” campaigns. Our slogan is not “Local Only,” nor “Local, Whatever the Cost” – but “Local First.”

Strong local markets prepare companies for going global, without giving away the diversified businesses local necessary for local economic success.

Your real beef seems to be that if Canadians follow the buy-local logic, Vermonters will suffer. In the short-term, perhaps. But in the long-term, Canadian communities that go local will get wealthier, and then be poised to spend on all kinds of goods and services, including those from its closest neighbor, Vermont. Wealthier Canadians might even take even more vacations at Stowe.

Buying local first, when done wisely, means spending less money: Moving one’s mortgage, the single largest expenditure by a U.S. household, from a global bank to a local credit union can save thousands of dollars over the lifetime of the loan. Local energy conservation, according to the Rocky Mountain Institute, can make the average U.S. household more than $3,000 wealthier. Local wellness investment, things like family counseling and good nutrition, preempts expensive nonlocal disease treatment and saves thousands in health care expenditures.

Smart localization means finding and seizing opportunities for saving money and enjoying all the benefits –greater income, wealth, jobs, and tax revenues – that come from replacing unnecessary or expensive imports.

Moving my own mortgage from Bank of America to a local credit union gave me lots more money to buy all kinds of things, including meals at local restaurants and nonlocal single-malt scotch. As I increase the fraction of my purchasing that is local, I’m also raising the level of certain imports into my community.

In other words, it’s quite possible – paradoxically – that localization can increase a community’s absolute level of trade. But rather than import things, like finance, that my community can do competitively, I’m importing those very special things like fine scotch that my community definitely cannot do. That’s what David Ricardo really meant by comparative advantage.

You believe that wealth comes through maximizing trade and trivializing local markets. In fact, your strategy is guaranteed to transform thriving communities in Vermont into destitute maquiladoras, where they achieve one or two comparative advantages that can collapse overnight with a shift in global markets.

The smarter strategy is for a community, through the wealth of localization, to help its local businesses to realize hundreds of potential comparative advantages. It is localization that offers communities, in Vermont and elsewhere, the only plausible path out of poverty.

(This piece is adapted from Michael Shuman’s blog at www.smallmart.org )