An Outlook

[NOTE: With the holiday shopping season upon us, it’s time for me to remind you of one of my personal crusades. So this issue, I re-present (with a few updates and alterations) a column that is near and dear to my heart.]

At this time of year it seems we are constantly reminded that consumer spending constitutes 2/3’s of our nation’s economy. When the fraction is replaced by dollar amounts the numbers become staggering, even hard to believe. Maybe even more surprising is that American consumer spending amounts to almost 1/6 of the world’s economy. So the reality is that Americans love to shop; they love to consume, which is why customers are called consumers in the rarified world of economics.

These days, American consumers are faced with a multitude of choices. The radio tells us to spend our money here, the television tells us to spend our money there, Internet shopping is an ever-growing temptation, and the newspapers are filled with flyers offering bargains at both here and there.

With all these choices, stores compete by trying to offer the consumer the lowest possible price, in some instance selling goods at cost just to get you into their stores. All of which seems to be a good thing because if there is anything Americans enjoy more than shopping it is shopping and getting a bargain. So when I tell you that – whenever possible – you should shop locally, even if it means paying somewhat more than the advertised lowest price located outside the local area, you’re apt to think I’m crazy. But the reality is, folks, that shopping locally makes very, very good economic sense – particularly on the Door Peninsula.

Rather than bore you with numbers and statistics to support my claim, let’s try a metaphor. Let’s pretend that the tourist season in Door County is the rainy season, and that the off-season is the dry season. And let’s pretend that rain represents money.

In the rainy season, the county – quite obviously – receives lots of rain (we could probably all stand a monsoon, but that’s another article), while in the dry season almost no rain falls. And now, let’s pretend that every household and every business on the peninsula has a rain barrel. These rain barrels represent the money each household and business has at any given time – in other words, their individual economies. Collectively all these various rain barrels, and all the rain they hold, represent Door County’s economy.

Obviously, we need water from our rain barrels to live so we are constantly taking water out of barrels (for paying the utility bills, our rent or mortgage, shopping, etc.).

So now, it’s the rainy season. The rain (i.e. tourists coming to the county and spending money) is filling rain barrels at businesses throughout the county. In anticipation of this additional rain, businesses start transferring some of their rainwater to other households (by hiring back laid-off workers, giving existing workers more hours, or simply hiring new employees).

For sixth months, more or less, rain falls into the barrels or is transferred into barrels. The most important part of the rainy season, though, is that more rain is falling into the barrels than is being taken out of the barrels.

The rainy season, though, is followed by the dry season. In the dry season there is some rain (a limited tourist trade, some mail order, etc.) but it is very limited. Now the challenge facing the county residents is how to make sure they have enough rainwater to last until the next rainy season.

In the dry season the rain barrels have the same amount of water being taken out, if not more, as in the rainy season. And some of this water simply vanishes from the county (payments for phone service and electricity, for example), and there is nothing that we can do to stop it. But when we can choose, shopping locally is one way to ensure that even if the money comes out of our rain barrel it stays in a rain barrel here on the peninsula (in other words, it stays in the county’s economy).

If you shop on the Internet or venture down to Green Bay to do your shopping, then the water you take from your personal rain barrel is simply gone (including the local tax that would have been collected on your purchase that would have stayed in the county’s economy). Not shopping locally is virtually the same as pouring water from your rain barrel out on the ground or down the drain.

On the other hand, if you shop locally, it’s like taking water from your rain barrel and transferring it to the local store’s rain barrel. The water stays in the county’s collective water supply (or economy) and the county collects its sales tax.

Even more importantly, spending your water (money) locally has what economists call “the multiplier effect.” Local stores and businesses, more often than not, utilize other local businesses (accountants, legal services, advertising, etc.). So local businesses tend to transfer water from their rain barrels to the rain barrels of other local businesses, and those local businesses transfer water from their rain barrels to other local businesses, etc. Keeping money in the local economy (Door County) benefits everyone, including the individual consumer.

And I can’t go through this whole article without at least one set of hard numbers, so let me share this: an October 2004 study by Civics Economics concluded that for every $100 spent at a local business $73 remains in the local economy. Now consider that for every $100 spent at national chain store only $43 remains in the local economy. And these numbers are even more skewed when Internet shopping is compared to local shopping. So would you rather keep 73 percent of your water in local rain barrels or do you thinks 43 percent is enough?

Okay, enough about rain and rain barrels. While my metaphor illustrates the concepts behind the importance of shopping locally, the rainy season/dry season aspect might be somewhat overstated. In reality, shopping locally, whether it’s staying within the county for your shopping as much as possible (and, in particular, avoiding internet shopping when local alternatives are available) should be a year round endeavor. The benefits to you and your community are far greater than the alternatives.