Local Leakage

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Congratulations to the new Bunnings store on their opening of a ‘community friendly’ business. They did a great PR job. While it may be true that 50 ‘new’ jobs have been ‘created’, selling the same stuff in a community that already has businesses selling those products doesn’t create new jobs, it simply shifts the employment from one company to another… the equivalent of 50 people will lose their jobs because the demand for the product has not increased.

What this kind of change does is increase financial ‘leakage’ from the community as locally owned businesses shut down because the out-of-town and overseas owned companies take most of the money we spend out of the community instead of it being reinvested locally.

The simple economics suggest a net loss to communities when retail businesses who take profits out of the community replace locally owned shops. The more times a dollar is spent in a local location and the faster it circulates the more income, wealth and jobs there are in that location

Michael Shuman, author of “Going Local. Creating Self-Reliant Communities in a Global Age”, cites a number of recent studies that have shown how a dollar spent at locally owned businesses will deliver two to four times the economic impact of a dollar spent in businesses owned outside the community.

In recent presentations Shuman has criticised politicians for focusing on how to attract and retain large corporations and failing to champion the development and retention of small local businesses.

Shuman argues that local businesses produce better economic results for communities for three main reasons: 1. They stay put – they don’t usually have big ambitions for growth or need to manufacture goods offshore; 2. They spend more of their money locally – they use local business services like lawyers, stationary suppliers and advertising and any profits are retained locally; 3. There are significant environmental benefits from shifting our diets to eat more local produce and less imported food – packaging, carbon emissions and fossil fuel consumption are all reduced when we eat locally.

Our region would benefit from better use of the $700m we take home in annual household income. It would be good to see an organisation like ECT investigate the opportunities associated with the establishment of a regional bank similar to the Taranaki Savings Bank in an effort to keep finances within the region rather than send both our savings and interest payments off-shore. Other communities in similar situations to our own have successfully created local currencies, local stocks and local exchanges (one recent example is: www.thelewespound.org). By spending local money in local outlets we can strengthen the relationships between local shopkeepers and the community. It also supports people finding new ways to make a living.

It may be useful if the Economic Development Unit at Council could provide ongoing analysis on the amount of financial leakage from our community to non-local business and to see Council adopt some concrete plans to reduce the leakage.

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