Shop Downtown to Build our Local Economy

The other day Joe Borgstrom (of Michigan's Main Street program, and the first director of the Shiawassee Economic Development Program) reminded me of the leaky bucket and its role in the economic health of our community. He also shared some data that reminds us of why we need to shop locally to get our economy going strong and employment as full as possible.

Our community, like all places, has a local economy where people buy goods and services from one another. Money comes into our community (the faucet) from a variety of sources: most importantly are the wages and other earnings from companies that make things here and sell them nationally or internationally; but money also flows into individuals and businesses that provide services to other outside the community; crops grown here and sold on the market also bring income; transfer payments (e.g. private pensions, Medicare, and other government aid) are also a major inflow.

When money comes into the community, it gets spent at the grocery store or other shops, at restaurants, for services like accountants or house cleaners, in buying supplies to run other businesses, to get healthcare, and in the form of donations to local charities or to pay local taxes. And of course when the local shopowner makes a sale, then he or she uses that income to buys goods and services. This is called the multiplier effect and has long been the subject of study by academics and the focus of economic development efforts.

Of course, not all the money that flows into the economy stays here. We make purchases at stores outside our community, we buy services from national companies, we shop online, and we pay taxes to the federal government. All of these outflows are the holes in the bucket. Typically, new dollars turn over several times in the local economy, thus filling the bucket, but they eventually seep out to other places as near as the regional shopping mall and as far as China for that new celphone or other electronic gadget.

The traditional approach of many economic development efforts is to increase the flows into the bucket, and Shiawassee County has done a relatively good job in recent years in supporting the growth of income-generating manufacturing companies; we need to do more, especially supporting entrepreneurs. However, we can also promote the local economy by seeking to plug the holes in the bucket of our local economy.

At this time of year, we can plug some holes and support our local economy by shopping downtown, eating at local restaurants, and making donations to local charities. A study from West Michigan found that when a dollar was spent at a locally-owned business, 68 cents of that dollar recirculated through the local economy. For every dollar spent at a national chain store in the local market, 43 cents stayed locally. These figures vary somewhat from business to business, but several other studies from other communities confirm the economic benefit of shopping locally. What is clear is that when we shop in other counties very little economic gain accrues locally. Online shopping is the worst for the local economy, with only a penny or two coming back to the community in the wages of postal or delivery workers.

After the holidays are over, we need to take a look at our local economy and figure out what other holes we can plug by identifying what retail, entertainment, services, business support, and supplier businesses our community is lacking. When we identify the outflows in our local economy we will be identifying economic opportunities for a local entrepreneur to fill, and if we grow our local businesses, we will grow our local economy.

In the meantime, as you do your holiday shopping, take a stroll downtown, check out our local businesses before getting in your car or online, take someone out for a meal, buy a local gift certificate, or swing by the Shiawassee Arts Center or the Four Seasons gift shop at the hospital or the Steam Railroading Institute. Think too about making a donation to a local charity as a meaningful way to show someone you care (for instance you can participate in Operation Friendship at Arc Shiawassee or buy a theater seat from the Owosso Community Players). When you shop locally, not only will you be supporting the local economy, you might run into an old or new friend out and about. And relationships, whether personal or economic, are what really make our community special. Happy Holidays!