Going Local: The Impact of Institutions on the Local Economy Richard Schramm

Going Local: The Impact of Institutions on the Local Economy

Richard Schramm

Community DevelopmentUNH

February 26, 2009

• 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

Overview

Michael Shuman

Our Perception of Globalization

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

Michael Shuman

U.S. GDP

0%

10%

20%

30%

40%

50%

60%

70%

Small Buz

Nonprofit

State/ Local

Federal

Size of Community Enterprise Sector

Michael Shuman

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

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 non-wage 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

SectorPurchase

(in millions)Percent of

Total Purchases

Services $28.29 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%

Totals* $106.83* 100%*

UVM Purchases By Economic Sector - 2000

*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.

Economic Sector

In-StatePurchases

(in millions)

TotalPurchases

(in millions)

In-State Purchasesas Percent

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 $1.17 $4.75 25% Financials/Real Estate $2.04 $9.22 22%

Manufacturing $2.25 $16.94 13%

Communications $0.17 $1.73 10%

Total Amounts $59.83 $106.83 56%

Percent of In-State Purchases By Sector

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.