Does Buying local really help small businesses, or is it making everyone poorer?

Does Buying local really help small businesses, or is it making everyone poorer?

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Everyone has heard the idea that we have to shop local and support local business before spending money at big box retailers or chains because keeping our money in our community makes us wealthier, but how accurate is that really? Does it actually benefit the community to only buy locally made products, or is it making the community progressively poorer? Is this a small-scale example of capitalism and free trade?

 

Everything we have is the product of a global effort. It is very, very difficult to make something from entirely local materials to the complexity that we do today. Every economics student has heard of “I, Pencil”, which describes how complicated it is just to make a pencil, which is essentially useless in value, yet it takes many people in many places to assemble it entirely. This has been a product of trade and the understanding that you cannot do everything for yourself. Attempting to make all your own things and be self-sustained is asinine, as is the notion we should only shop locally. Limiting yourself as a community to only consuming what you can make limits you to very basic products with a lack of technology.  This idea of shopping local is very common in smaller towns, which is unfortunate for them because that is where it is really going to have a negative effect on the community and will hinder their economy the most.

 

Even with local stores that sell the same products that big box retailers would sell, the consumer is still on the losing side. Unless a local store is selling the same product as a larger chain at the same competitive price, it doesn't help buying that. One would argue that the level of satisfaction and happiness that a consumer receives by shopping local in their community outweighs the little extra cost of buying that product from there rather than a chain, but how could that be quantified? Couldn't you have a similar amount of satisfaction from buying something else as well as what you just bought if you spend less at the chain instead? The consumer does not have the same amount of satisfaction spending more money just to benefit a local shop owner because that is money that they wouldn't be able to spend elsewhere, an entirely sunk cost. This leads back to Bastiat’s broken window fallacy where a broken window appears like an opportunity to stimulate the economy by hiring a local window fixer to fix the broken window, but it is money that could be spent elsewhere to get something else. It makes society poorer by the cost of one window despite hiring local workers because you could have had one window plus another thing for the same cost of just fixing the window. This is the same idea that people use to justify spending more money at a local store for the same product you could have gotten cheaper at a bigger chain store. Just because it is a local store does not mean it stimulates the local economy anymore, it actually makes individuals poorer. They would have the same product plus more if they had bought it at the bigger store rather than shopping locally.

The fallacy of buying local and it benefiting the community is a small scale example of protectionism. Protectionism is essentially the same idea as shopping local, that we should produce for ourselves as a country and limit our imports with a tax on imports as well. Although this tends to be less of a party issue, the roots of the issue are government intervention, free trade, and capitalism. Trading freely throughout the world benefits all of us, and government taxing us on an attempt to better ourselves with specialization is wrong. Progressive liberals have a hatred of capitalism, which makes sense from their advocacy of shopping local. Simply put, capitalism and shopping globally lets you have nicer things at a lower price, and who doesn't want that? Despite the hatred progressives have for corporations and big businesses, they provide you with products cheaper and easier to obtain than buying local from your community would ever allow you to.  

Follow this author on Twitter at @shannadnelson

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