‘Buy Local’ Argument Wrong on How Business and Money Works

A patron holds an iced beverage at a Starbucks coffee store in Pasadena, Calif., July 25, 2013. (Mario Anzuoni/Reuters)

This holiday season, ignore the ‘buy-small/buy-local’ nonsense.

It’s the boss-bossiest time of the year, when Americans getting ready to open up their wallets to buy Christmas presents are lectured by illiterate halfwits about where and how to spend their money. The usual demands: Buy local, or buy from small businesses.

This is pure nonsense, and you should feel free to ignore it.

The “buy local” people insist that if you choose, say, your locally owned coffee shop over Starbucks, then the money you spend there will somehow stay in the community, hanging around and providing additional economic benefits. But that isn’t how money works: Most businesses spend most of what they take in and then put the rest in the bank, where it becomes global capital.

And local businesses do not generally spend their money locally — they can’t. I like my local coffee shop, and I am pretty sure that it does not buy its coffee locally, because I do not live in Colombia or Brazil or Vietnam, and it doesn’t buy its to-go cups from a local maker, since it is not in the shadow of a paper-goods factory, etc. Its lease is probably held by an out-of-town entity, along with its loans. Its espresso machine probably came from Italy or Germany, maybe Hong Kong.

For many businesses, the largest expense is personnel. Those local coffee-shop employees aren’t any more likely to spend their income locally than anybody else is, because they will want things like shoes and meat and Netflix rentals that are not made locally — but, to the extent that they do spend that income locally, they are about as likely to do so as a Starbucks employee is. For that matter, you probably have more Starbucks and Amazon shareholders in your neighborhood than you do independent coffee-shop proprietors or owners of small local stores. Shareholders are your neighbors, too.

But even if money did work the way the boobs say it does, money isn’t wealth — it is a record-keeping system that enables easy exchange and helps us to store value. What makes our communities, our country, and our species more prosperous isn’t trying to fence in money locally through campaigns of unsolicited advice, but the division of labor and specialization, which allows us to produce more with fewer resources. Sometimes, that favors big businesses, although many big businesses are in effect something more like a big network of smaller businesses: There aren’t a lot of mom-and-pop automobile companies, but General Motors doesn’t make most of the components that go into a Corvette — smaller companies do. There’s room in the market for both my local coffee shop and Starbucks for the same reason there’s room in the market for both Burger King and the French Laundry.

(I think the world would have been less mad at California governor Gavin Newsom if he had been dining with lobbyists at Burger King. But with a punk-ass yuppie name like Gavin Newsom — well, have it your way, governor.)

People in Portland like their coffee. But Portland isn’t somehow disadvantaged because Portlanders drink coffee that is grown in Lam Dong or Harar. Portland has other problems, mainly the fact that it is packed to the gills with the sort of people who choose to live in Portland. New York City has a lot of famous steakhouses. It doesn’t have a single cattle ranch. And if you have lived within smelling distance of a feedlot, you might be forgiven for suspecting that New Yorkers get the better end of that deal. A lot of cattlemen would disagree — everyone likes what he likes.

There is competition in the market, but its salient characteristic is cooperation: Through the market, we solve social problems together on a voluntary, collaborative basis. One of the consequences of that is that the cattlemen in Texas have an interest in the prosperity of the steakhouse patrons in Manhattan, and vice versa. The people who want you to believe otherwise are the same ones who want you to give up Bordeaux for wine made in Missouri or Oregon or Illinois — i.e., people who are not to be trusted.

The relationship between small business and big business is complicated. Some small businesses have big-business competitors that make life hard for them. But a big share of small businesses have as their single biggest customer . . . a bigger business. That is true for businesses from machine shops that make components for complex manufactured goods to service providers such as diesel mechanics and landscapers. There are thousands of very wildly profitable businesses across this country that you have never heard of, because they don’t have anything on the shelf in Walmart with the company name on it. But you use their products every day.

Small businesses rely on big businesses in other critical ways, too: Online markets such as Amazon and Etsy help small businessmen connect with customers all over the world, and global firms such as FedEx provide them important logistics and shipping services. I was looking for an out-of-print book a while ago, went on Amazon, found a copy at a local bookstore in India — everywhere is local to somewhere — and, in only a few days, I had my book, a bookseller in India had my money, Jeff Bezos (pbuh) had taken a cut for making the connection, and everybody was happy. Not quite magic, but as good as.

I like my local coffee shop and the other locally owned businesses in my neighborhood. I hope they do so well that the folks who own them all buy Italian cars.

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