Small Business Saturday — Shop Local

(this was originally published in a local SE Massachusetts/RI magazine called South Coast Prime Times. It was the Jan/Feb issue of 2014)

Here on the South Coast we have a strong tradition of Yankee frugality that can strain things during the Christmas season. Many of us have been weaned on the mantra, “save, save, save.” But during this time of year, we are urged to “spend, spend, spend.”

This “save or spend” dilemma can create a moral quagmire: we are either a spendthrift or a cheapskate. There seems no way out, but wait — let’s examine this.

Contrary to popular belief, money doesn’t die when it leaves our hands. Yes, we’ve all said, “Well, I killed that $20.” But we really didn’t kill it; we just passed it along to someone else.

Let’s say we save it: we put it in a piggy bank or under a mattress. For all practical purposes, this saved money is temporarily dead; it is no longer an incentive for transactions; it is as if it had never been minted. So, the saver is the one that really kills that 20 bucks.

Vital Frivolity

Yes, I know, this seems contrary to what we have learned. But what we normally call savings is really invested (unless it’s in the mattress or piggy bank). During Christmastime, the economy depends on us converting that money into consumer goods or services. The fiscal soundness of our way of life depends on us being somewhat frivolous during this giving season.

We live in a consumer-driven world economy. Money trading hands drives virtually all business. It starts with the farmer who creates food. Food is sold (converted into money) and is then recirculated when the farmer goes shopping. Shopkeepers buy their wares from factories who hire workers who buy food….

In an open economic society, as long as the money keeps trading hands, a natural balance occurs.

When the money stops moving around, things go awry. We say that there is less money around. We are partially right — less of it is around us. Money doesn’t disappear, though, it’s just not around us.

“Trickle-down” is a misnomer. Money is to society as cream is to milk: it rises to the top. What comes down does not trickle and is not cream. Trickle-down economics was well intentioned; it even had some historical references to demonstrate its viability. The problem is that technology combined with some well-intentioned but poorly timed legislation has thrown off the balance.

Technology has made life easier for many of us; it has also made us more easily replaced. It has become easier for someone in New Bedford to buy potatoes from a farmer in Idaho than from a farmer in Mattapoisett. It is easier to buy clothing made in the Far East than that made in a nearby factory. It is much more convenient for a consumer looking for three items to go to a big box store rather than three separate local shops.

The consolidations that resulted from the combined technological revolution, the deregulation of big business and the accessibility of cheap labor left a relatively small number of companies doing most of the world’s business. These companies gained efficiencies that seemed impossible a few years earlier and were able to offer products at unheard-of low prices.

Jobs that once took hundreds of workers could now be done with two or three. Production and transportation that once took months now takes days.

Big business wins, small business loses; consumers win, workers lose.

But wait, workers and small business folks are the bulk of consumers, aren’t they? How can they both win and lose?

Mutual Needs

Our economy works best when there is a balance between labor and management. Neither can exist without the other, but given the opportunity, each continues to be eager to hold a proverbial gun to the other’s temple. Current advantage: management.

What’s this got to do with Christmas shopping and Yankee frugality? Well, this is where that frugality bites us in the butt. Convenience and low prices have consequences. We’ve learned to save, save, save; and when we do spend, we look for the best deal

Well, we are butt-bitten because in getting the best deal we send our money to places where it won’t come back. When we shop locally, more of that money recirculates locally. When we buy from China, it’s gone.

So whose fault is it that there are fewer $20 bills circulating around? That proverbial gun that labor and management like to hold to the other’s temple; the real gun is held by the consumer. Neither business nor labor can exist without the consumer. As a group, consumers circulate all of those $20s.

When we shop at the big box store, online, or eat at a chain restaurant, we send our money to far-away places. Twenty bucks spent at a locally owned shop will benefit our local economy; done thousands of times over it will have a large impact and more money will circulate closer to home.

This Christmas, make a few purchases at local shops or buy a few items produced by locals: yes, this will help to re-balance the scales — it will make a difference.