Tuesday, July 7, 2009

The "Buy Local" swindle

When it comes to economic nonsense, there are plenty of local options

I remember almost two years ago when I first noticed "Buy Local — Keep Portland Independent" signs sprouting on Old Port shop windows like dandelions on a lawn. I told a store-owning friend that I didn't think the “buy local” campaign she joined is actually good for the local economy and relies on faulty logic.

She gave me the most honest response I have heard on the subject; “I don't care, it's good for my business.”

And that's what has been driving the buy local campaign all along. Normal businesses compete by offering things like low prices, superior products or expert advice. Instead, buy local activists rely on guilt and economic witchcraft. They promise Portland will become rich if it becomes an island to itself, and anyone who buys from a competing business is a marked traitor.

Portland Buy Local activists appear unable to distinguish between micro and macro economics. They didn't learn anything from the disastrous Smoot-Hawley Tariff of 1929, they don't understand the folly of make-work programs or protectionism. This is a Luddite movement that hasn't heard Adam Smith or David Ricardo's basic arguments on the role of specialization in wealth, or even know of comparative advantage.

In plain English, they don't know what they're talking about. Their motivation is simply to increase sales for their members, and they don't mind telling a few howlers along the way.

Recently Portland Buy Local has launched a campaign with the empty promise that if we all shift 10 percent of our purchases to local vendors, 600 new jobs and $50 million in new “economic activity” will be created here.

Not so fast, buy local activists. This is a part of a big New England-wide campaign and the website fails to mention exactly where these numbers come from. The page of official supporters lists only politicians. Funny, but I couldn't find a single professional economist cited anywhere. Instead I found biased reports from activist groups like Civic Economics and the Institute for Local Self-Reliance.

In their own 2007 study, Portland Buy Local reports the campaign has worked because more than 60 percent of their members saw increases in sales. Pardon me, but that simply means their members are making more money – it forgets about all the benefits to Portland's economy it promised. Perhaps this is because the “buy local” approach is a recipe for poverty, not prosperity, and the only people who benefit are the merchants.

Wealth is created by specialization and trade, not xenophobicly discriminating against business owners from away. You can not create wealth by being purposely inefficient. Instead, The "buy local" approach encourages inefficient production and wastes resources — and for the record, wasting resources does not help the environment.

If you're curious to see what a truly "independent" community would look like, gaze upon "the 100 mile suit" to see the results of 500 hours of labor from 20 skilled artisans. They attempted to make a men's business suit using local materials and talents, but instead created a lumbering burlap caveman. If the workers were paid a modest $10 an hour, the labor cost alone of this itchy eyesore would be a staggering $5,000 and they could only produce four suits a year working full time.

But don't tell the buy local people that. They heralded this project as a success, even though the consumers in such a backwards system would be in grinding poverty.

The same thing would happen if we only listened to local music. Sure, the Portland bar bands would see their album sales go up, and I'm sure most of us would find at least one song we can enjoy. Still, we'd be robbed of The Beatles, Pat Benatar and David Bowie and our musical enjoyment would suffer.

In addition to our own local campaign, Maine businesses have to deal with the impact of buy local activists in other areas. These movements threaten to keep customers from other states away from Portland – not the best thing for our summer tourist trade. Maybe “Boston Buy Local” should be seen as a hated enemy of the Portland economy. Does Portland Buy Local think cities should break into warring camps?

Perhaps buy local activists should push a “sell local” campaign, and advise Maine businesses like LL Bean and Poland Spring to stay independent of foreign customers. This would make Maine truly independent, but only an idiot would think this would help our economy.

The alternative to that stupid idea is for Portland Buy Local to try to minimize purchases from outside Portland, and maximize sales from out of town. If you see this as a good approach then congratulations, you are now arguing for mercantilism, something economists have ridiculed since Adam Smith published The Wealth of Nations in 1776.

1 comment:

  1. It's indeed an uphill climb getting people to understand trade gains. If this Russ Robert's talk could be turned into a 5/10 min youtube animation, it would be an awesome tool: http://www.econtalk.org/archives/2010/02/roberts_on_smit.html