Wednesday, November 24, 2010

'Buy Locally'? Good Luck

November 24, 2010, 9:00 a.m.

"Buy Locally": Rousing Slogan, Largely Meaningless
(bought to you by*)

Many local businesses become profitable, "go into the black," the day after Thanksgiving ("black Friday"). If it weren't for our purchases from Thanksgiving through the end of the year many wouldn't be around in 2011.

So the Press-Citizen is urging us to "shop locally." Editorial, "Remember to Buy Locally This Holiday Season," Iowa City Press-Citizen, November 24, 2010, p. A11 ("The benefits of buying local have been touted -- by local businesses and by this editorial board -- repeatedly. By now everyone should know at least one simple fact of economics very well: Local dollars spent in locally owned stores stay in the community; local dollars spent in non-locally-owned stores leave the community for other regions, states or even nations.").

The holiday season does provide some seasonal, part-time, minimum wage (or slightly above) jobs in retail and related businesses. Even if such workers are only employed for a few weeks, and they're looking for work again come next January or February, better the jobs should be at the Coral Ridge Mall, going to our community's otherwise unemployed, rather than to Minneapolis' workers in the modestly named "Mall of America."

Unless, of course, one cares about all American workers, and businesses, and the mounting national and personal debt as we borrow money from China to buy goods from China.

So what does "buy local" mean?

To really analyze in detail what happens to the dollars we spend in Johnson County establishments would require more data and degrees in economics than most of us would ever have -- or want.

Raw materials. For the most part we cannot control where the raw materials come from; e.g., iron or aluminum ore. (China also controls over 90% of the rare earth minerals essential in the production of cell phones and other electronic products.) An exception would be locally produced foods at our Farmers' Market. (Although even they may also import seeds or fertilizer.)

Manufacturing. At the bottom of this blog entry I provide a shocking and depressing list of products, once America's pride, that are now imported. Few of the products you "buy local" were even made in the U.S. or Canada, let alone Iowa City. Again, an exception would be local artists and artisans. (Although even they may use paints and brushes, silver and gold, from elsewhere.)

Packaging, transportation and warehousing. I recall learning years ago that the worker who makes the box for your cold cereal in a matter of seconds (if that) earns a larger share of what you pay for that box than the farmer earns for the grain it contains. It's true for many of the packaged products we buy. Nor are transportation and warehousing a trivial portion of what we pay. We cannot "buy local" any of those costs; or, otherwise put, none of what we pay, as those costs are passed along to us, stays in our community.

Rent and utilities. When we "buy local" a part of what's passed along to us, and what we pay for, are things like rent and utilities. Last I knew MidAmerican Energy was owned in significant part by Warren Buffet. I have no idea who owns Qwest or ATT this week, but I know it's no neighbor of mine. Mediacom is owned by some guy in New York who's about to buy up the public shares so he'll own all of it again. When the rent comes due for our Coral Ridge Mall stores, where does it end up -- New York, London, who knows?

Franchises; national chains. The Press-Citizen says we should not buy from Internet Web sites. But how much of the price of anything you purchase at Best Buy stays in Coralville, rather than going to corporate headquarters or for other of the costs mentioned above? If it's a choice between (a) going out to the Mall to get something at the Best Buy store, or (b) ordering online from the Best Buy Web page, for delivery to the Coral Ridge Mall Best Buy store for you to pick up, or (c) delivery to your home, what, precisely, is the marginal benefit to our local economy of (a) over (b) and (c)? What are the economics for Johnson County of the other "local businesses" that send a share of their profits to the remote corporate headquarters of national chain restaurants, retail outlets, and motels?

"Local" owners. Whether a stand-alone business, or a franchised chain store, how "local" is the owner or manager? Are they actually living in Iowa City? Or is the largest share of the ownership held by someone who has long since retired to Arizona or Florida and spends the profits there, with only rare (if any) trips to Johnson County?

Workers' pay and benefits. Finally, how much of what you're spending when you "buy local" is actually ending up in the pockets of the workers in that establishment (individuals who will spend most to all of their wages locally)? Does the owner/manager pay a "livable wage," health and other benefits -- or as close to the minimum wage as s/he can get by with and still find employees? If you want money to stay at home and circulate throughout the economy as fast as possible, giving more of it to local workers is the way to do it.

So, what can we do? What can the Press-Citizen editorial board do if it's really serious about its "buy local" campaign?

Press-Citizen, give us the information we need to fall in step, intelligently, behind your drum major. Have your reporters dig. Do the research. What's the difference, in terms of how much stays in the local economy, between buying a hamburger at Hamburg Inn No. 2 and at McDonalds -- in terms of all the factors listed above? Who are the landlords who are getting the rent from our "local businesses"? How much of that money is going out of town? How much of the purchase price of various products actually stays in Iowa City and how much goes elsewhere? Give us a couple of dozen examples, broken down with some precise numbers and details. Don't just tell us the overall benefit to the owner if the store is here, or if it goes out of business. Tell us: What is the incremental benefit locally from the sale of one more item?

Give us the tools, the precision tools, we need and I, and I believe a lot of other local citizens, are willing to do the job. Without the tools, "buy local" is just a rousing slogan, and, as Tom Joad says of the filling station attendant in Grapes of Wrath, "you're jus' singin' a kinda song." [John Steinbeck, Grapes of Wrath, p. 128.]

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Now for "Buy American." (Which is the best "buy American" strategy when purchasing automobiles: to buy a Toyota made in Indiana, or a Ford made in Malaysia?)

Here's Arthur Frederick Ide's take (drawing on Anika Anand and Gus Lubin, "18 Iconic Products That America Doesn't Make Anymore," in "Investing, Products and Trends, Recession," Yahoo!.com, November 4, 2010, who in turn drew on Business Insider):

From shopping at WalMart to buying at Dollar Stores where more than 80% of all goods sold are foreign imports, to driving oriental made cars, the average American are buying these products that began in the USA and now made overseas:

Beer (Miller, Coors, and Budweiser are now owned by foreign companies; Anheuser-Busch, the St. Louis MO based company that has nearly 50% of all market shares int he USA was sold to Intel, a Belgium-based conglomerate run by Brasil). Corona and others are now totally owned by other nations.

Cellular phones (none made in the USA since 2007) all are made overseas: India, Finland, Sweden, etc.

Converse shoes (since 2001) are now made in Indonesia.

Dell computers (last made in North Carolina, closed in January 2010; its Round Rock TX “headquarters” is a front organization to hide the outsourcing of USA jobs). Today the computers are made in Asia.

Etch-a-Sketch (since 2000) made in Shenzhen, China.

Forks, spoons, and knives (last manufactured by Sherrill Manufacturing that had purchased Oneida Ltd in 2005, closed down all operations in June 2010).

Hathaway Dress shirts (since 2002) made in India, Philippines, etc.

Incandescent light bulbs (last made in September 2010 by a major industry, although Osram/Slavania Plant in St. Mary’s PA is still producing the light bulbs to fill old and international contracts; they will soon announce their closure), closed down operations after the GOP Congress of 2007 passed a measure banning incandescents by 2014, prompting GE to close its domestic operations.

Levi jeans (last made in Dec. 2003) now all made in Latin America and Asia.

Mattel toys (since 2002) the largest toy maker and seller, is made in China (costing 65% of all jobs in its plant in California)

Minivans including General Motors and Chrysler chassis used on Chevrolet Uplander, Pontiac Montana, Buick Terraza, Saturn Relay, Chrysler Town & Country, and Dodge Grand Caravan (since 2003) are all made abroad.

Pontiac cars. Stopped all production in May 2010–yet over 60% of its employees drove Asian made vehicles, and few Pontiac cars were in the main plant in Michigan.

Radio Flyer’s Red Wagon (stopped production in March 2004) at its Chicago plant and now has all products made in China.

Railroad parts (castings, guard bars, braces, etc), none made in the USA since 2008.

Sardines (canned; the last produced in April 2010 by Stinson Seafood in Maine) now are made in Peru and other Latin American nations, and in Japan.

Rawlings baseballs (since 1969, made first in Puerto Rico, later in Haiti, now made in Costa Rica).

Strawberries and fresh fruits and vegetables are imported from Mexico.

Televisions (the last made in October 2004, was Five Rivers Electronic Innovations, a Tennessee company). Today none are made in the USA.

Vending machines (last produced in 2003 in the USA)

Wine: most are imported from Chile, Italy, France, and other foreign nations.

Job outsourcing will increase.
In short, it's even harder to "buy American" than to "buy local."

* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.
-- Nicholas Johnson
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