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Buying Local: Putting Our Money Where Our Mouths Are

Presidio Economics | Sunday October 2nd, 2011 | 0 Comments


3p is proud to partner with the Presidio Graduate School’s Macroeconomics course on a blogging series about “the economics of sustainability.” This post is part of that series. To follow along, please click here.

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Copyright melystu

By Wendy Weiden

We’ve all heard sneers from those saying that “buy local” is simply the latest foodie fad, but naysayers need to learn more about the power of putting their money where their mouths are. At a time when politicians and pundits are demonstrating that it’s still all about the economy, stupid, the argument for buying locally grown food has never been stronger. While this is certainly true for anyone picking up ingredients for an intimate Sunday supper, the real power to drive regional economic development is tied to the purse strings of places buying food for the masses: our schools, hospitals, jails, and other large institutions.

Industry Consolidation: Jobs and Money Flow Out

The number of American farms has shrunk substantially over the last century, from about 7 million in the 1930s to barely 2 million today. The reduction in independent farms represents not only a loss of productive agricultural land to subdivisions and highways, but a tremendous loss of on-farm jobs. As farmland has disappeared, so too have the many other businesses essential to local food economies, including processors, meat-packers, distributors, and grocers. As large, national (or multi-national) agribusinesses and retailers move in, local dollars are swept into a revenue stream that flows directly to corporate headquarters and out of each distinct region.

Regional Food Economies: A Circular Flow

A variety of studies have shown that shifting food dollars to locally grown and processed foods can inject significant sums into regional economies, thus creating a “multiplier effect” as dollars change hands multiple times within the region. That is, each dollar spent to purchase a specific food item is then exchanged again multiple times within the region, creating value for recipients at each point of exchange. Estimates of the power of this multiplier range widely, from a low of 1.30 to 2.60 or higher. These seemingly small figures add up to far more than pocket change: a North Carolina study found that a 10% increase in spending on state-produced food would inject $3.5 billion into the state’s economy annually, while another from a six-state Midwestern region suggested huge increases to both farm and retail sales ($882 million and up to $3.31 billion, respectively) and jobs (generating more than 9,000 jobs each for farming and retailing). While it may seem that purchasing locally just redistributes dollars rather than creating more of them, local purchasing actually spreads revenue out among more, smaller producers, with lower incomes (and lower rates of savings) than those who run large, national agribusinesses and conglomerates. This revenue is far more likely to be spent productively in the economy than be put out to pasture in investment and savings instruments designed for wealthy executives.

Staunching the Flow

While individual efforts to buy local have grown exponentially in the last decade, they remain a tiny fraction of total agricultural sales. To effectively staunch the flow of local food dollars out of regional economies—and thus preserve existing and create new jobs—will take a shift in purchasing on a bigger scale. Institutions (schools, hospitals, and jails) serve hundreds of thousands of meals every day. Using just a portion of their dollars to “buy local” would have huge ripple effects.

In fact, experience is already beginning to demonstrate the positive effects. A pilot project in two Oregon school districts directing just $.07 per school lunch to locally grown food resulted in job creation both on and off farms, and the increased sales helped some area farms remain economically viable. This pilot led to passage of a bill  in June to set aside $200,000 for similar purchases across the state, an amount which should be far surpassed by the value of the both the economic and employment multipliers discovered during the pilot.

In similarly exciting vein, the USDA is just announced a pilot program in two states to let schools use federal commodity funds (which average $.23 per meal) to buy directly from local growers, rather than from national suppliers. With current federal spending for the National School Lunch Program totaling over $10 billion, using even a tiny fraction of those dollars to buy local food could have huge effects on the quantity of jobs and dollars circulating in the local economy. Better yet, unlike almost any other government-backed jobs program, this stimulus can take effect without the use of any additional government spending. The program is fully funded and just needs to allocate dollars differently—a critical benefit for cash-strapped state and federal governments.

Maybe in this case, there is such a thing as a free lunch.

Wendy Weiden has loved food since her essay about baking a cake helped get her into college. She is pursuing a Masters in Sustainable Public Administration at Presidio Graduate School to explore ways of bringing public and private institutions together to drive productive, positive, and healthy change in our food systems.

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