The Economics Behind "Shop Locally" - Translation, Issue No. 1

We see the bumper stickers and hear the slogan repeated so often in these parts. But, did you know that there are some notable economics behind this concept of shopping locally?

A locally owned independent business returns approximately 45 percent of each dollar spent back to the community. Local, independent businesses assist the community through a “multiplier effect.” In other words $1 spent at a locally owned business will return five times that amount to the community through local taxes, employees’ wages, and through the purchase of materials and supplies at other independent businesses. In addition, these businesses will keep that dollar in the community by funding schools, social services and by making contributions to local charitable organizations. 

That is something worth repeating: $1 spent locally is spent again five times over within the local economy. This is why the "velocity" of money is like blood to a community. Dollars need to flow locally to create a vibrant and healthy local economy. You spend money at my store, I pay your daughter to babysit and go out to dinner. Then, those folks use the money to buy goods locally and it all continues again. This is recycling at its finest. 

In the coming months we hope to offer a thoughtful twist on the normal financial blog.  I've chosen the title of ''Tran$lation'' because we want to breakdown the myriad of complex financial issues of the day and relate it to our part of the world ... our Patch.

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