Going Local:
The Impact of Institutions on the Local Economy
Richard Schramm
Community Development
UNH
February 26, 2009
Overview
• Theory: Why Localization?
• Goal: More Self-Reliant and Sustainable Local
Economy
• Strategy: Local Ownership/Import Substitution
• Tactics
• Planning, Entrepreneuring, Business Alliances,
Investing, Policy Making
•
Local Purchasing (UVM)
• BALLE
Our Perception of Globalization
Michael Shuman
Why Localization?
• Price versus Place/Direct and Indirect
Costs
• Stability through Local Ownership
• Community through Local Support
• Economic Vitality through higher
multipliers (buying from one another)
• Social and Environmental Responsibility
through direct interaction
• Environmental Restoration through
reduced transportation
Building a More Self-Reliant Sustainable
Economy
• Develop and Support Community Enterprises
• Promote Local and Cooperative Ownership
• Build Business Culture of Social & Environmental
Responsibility
• Produce More of What Currently Import (Import
Substitution)
• Strengthen Local Economic Multipliers
• Reduce Consumption and Conserve Resources
Size of Community Enterprise Sector
U.S. GDP
70%
60%
50%
40%
30%
20%
10%
0%
Small Buz
Nonprofit
State/Local
Michael Shuman
Federal
Emerging Community Strategies
Planning
Plug the leaks.
Entrepreneuring
Support local entrepreneurs.
Business Alliances
Compete through collaboration.
Investing
Harness pensions locally.
Purchasing
Spearhead “Local First” campaigns.
Policymaking
Remove all anti-community enterprise
biases.
Michael Shuman
Local First Tools
• Coupon Books
• Labels
• Buy Local Weeks
• Local Gift Cards
Michael Shuman
Local First Tools
• Coupon Books
• Labels
• Buy Local Weeks
• Local Gift Cards
Michael Shuman
Local First Tools
• Coupon Books
• Labels
• Buy Local Weeks
• Local Gift Cards
Michael Shuman
Local First Tools
• Coupon Books
• Labels
• Buy Local Weeks
• Local Gift Cards
Michael Shuman
UVM Economic Impacts Project
(1999-2003)
• Use UVM employment and
purchasing practices to increase
support for workforce and business
development for Old North End
residents
• Focus on UVM $300 million annual
budget, about $160 million for
personnel, $140 for purchases of
goods and service
Why Should UVM Buy Locally and Within State?
·
UVM Mission to Support the State
·
Support Existing Businesses, their Employees and Communities
·
Develop New Businesses within Vermont. Diversify Economy
·
Create Positive Multiplier Effects on Employment, Income and Earnings
·
Reduce Environmental and Social Costs from Out-Of-State Purchasing (e.g.
associated with transportation)
·
Build Closer Relations between UVM and Vermont Businesses. Develop
Stable Partnerships. Greater Awareness of Negative Impacts (Externalities)
·
Can Have Impact - $300 Million Budget (60% Employment; 40% Goods and
Services)
·
Weigh Against Issues of Cost, Quality, Delivery, Reliability, etc.
Local Business Strategies
• Help Local Business Sell to UVM
• Developed and Distributed 500
Copies of “How to Do Business with
UVM”
• Increase Local Purchasing by UVM
• Inform and encourage buying local
within UVM
• Analyzed UVM purchasing patterns
and developed Targeted Buy Local
Policy
Types of UVM Expenditures on Goods and Services
·
UVM purchases for fiscal year 2000 was about $136.4 million.
·
Categorized all UVM purchases by industrial sector
(Standard Industrial Classification – SIC code) for fiscal year 2000.
·
Consisted of 8,250 individual purchases across almost 400
sectors.
·
Eliminated international purchases, individual purchases less
than $750, purchases unidentifiable by sector or location, and nonwage purchases from individuals.
·
Result was $106.8 million of purchases that could be identified
and described in standard industrial classification (SIC). 79% of
Total.
·
$106.8 million was paid out to 2816 vendors from 382
industries each with their own standard industrial classification
UVM Purchases By Economic Sector - 2000
Purchase
(in millions)
$28.29
Percent of
Total Purchases
26.5%
Trade Contractors
$19.42
18.2%
Manufacturing
$16.94
15.9%
Retail Goods
$13.83
13.0%
Financials and Real Estate
$9.22
8.6%
Utilities
$7.25
6.8%
Wholesale Goods
$4.75
4.5%
Transportation
$3.39
3.2%
Communications
$1.70
1.6%
Government
$1.67
1.6%
Natural Resources
$0.34
0.3%
$106.83*
100%*
Sector
Services
Totals*
*Totals differ because of rounding
In and Out of State Purchases
(2000)
Of the $106 million:
·
56%, or $59.8 million, was purchased from 923 Vermont
vendors.
·
44%, or $47.0 million, was purchased from 1,893 vendors
throughout the United States (outside of Vermont).
The amount of in-state purchases as a percent of the total
purchases within a sector varied by sector from 100% of
utilities to 10% of communications.
Percent of In-State Purchases By Sector
Economic Sector
Total
In-State
Purchases In-State Purchases
Purchases
(in
as Percent
(in millions) millions) of Total Purchases
Utilities
$7.25
$7.25
100%
Trade Contractors
$18.49
$19.42
95%
Retail Goods
$11.08
$13.83
80%
Governments
$1.25
$1.67
75%
Natural Resources
$0.24
$0.34
69%
Transportation
$1.80
$3.39
53%
Services
$14.08
$28.29
50%
Wholesale Goods
Financials/Real
Estate
$1.17
$4.75
25%
$2.04
$9.22
22%
Manufacturing
$2.25
$16.94
13%
Communications
$0.17
$1.73
10%
Total Amounts
$59.83
$106.83
56%
Factors Used to Examine Specific Industries
Purchase Location
·
Focus on out-of-state purchases
UVM’s costs and profitability:
·
Price
·
Quality
·
Time required to get product
·
Reliability of vendor
·
Availability of good or service within Vermont
Income Effects.
·
The higher the average wage in a given industry the more
likely we will be to recommend it for increased local purchasing.
Factors Used to Examine Specific Industries, Cont.
Multiplier Effects
·
Employment and earnings impacts beyond initial firm UVM buys
from
Local Industrial Capacity
·
Adequate number of establishments and employment levels in
industry.
·
Industry importance in Vermont relative to US Economy, and growth
rate
Other Impacts
·
environmental impacts of different industrial purchases, price,
quality, delivery, and other vendor and product characteristics of
importance to UVM purchasing
·
local and state priorities (when present) for advancing specific
sectors.
Business Alliance for Local
Living Economies (BALLE)
An international alliance of more than 50
independently operated local business networks
with more than 15,000 members dedicated to
building local living economies.
They envision a sustainable global economy
made up of local living economies that build
long-term economic empowerment and
prosperity through local business ownership,
economic justice, cultural diversity and
environmental stewardship.