It pays to circulate dollars locally

At first glance, a discussion of the local economy may seem unrelated to the farmers’ market or perhaps just uninteresting!  But this is actually a fascinating topic that deserves a moment of our attention.  How does our money circulate in this beautiful valley we call home?  Or, more to the point, does our money circulate here before it leaves?

Every dollar we spend has the power to influence our community.  Whether we realize it or not, we are shaping the world we live in each time we make a purchase or pay for services.  Economic growth resulting from a strong local economy increases our standard of living by improving city services such as parks, police, and fire protection says La Grande city mayor, Colleen Johnson.

When we think about strengthening the local economy, we often think about bringing in new jobs but it is equally important that we think about where the money goes once it gets here.  The Local Multiplier Effect is the economic term used to describe how many times a dollar recirculates within the local economy before leaving.  The beauty of this system is that we all have the power to improve our local economy because each new round a dollar makes has the same impact as a new dollar coming into the community.

It is estimated that over the past 100 years American towns have gone from a typical recirculation rate of 25-30 to something less than 10.  With the expansion of national businesses into local markets, we have unwittingly redirected a lot of the money that once fueled our local economies.  100% of our dollar is lost from the local economy each time we spend money outside of our community (on-line purchases, shopping in a bigger city, using services from out of town).  Even shopping at a national chain located in the community brings a much lower recirculation rate.

Two studies comparing locally owned businesses with nationally owned bookstores in Texas and Maine showed that $100 spent at a national retailer yielded a return of about $15 to the local economy while the same amount spent at a locally owned business yielded a return of about $45.  The reason for this difference is that local retailers are much more likely to use local services such as accountants, banks, bookkeepers, and advertising.  These businesses are also more likely to purchase office supplies or other materials they need locally.

About 90% of the vendors at the La Grande Farmers’ Market live in Union County and the other 10% live in neighboring counties within about 100 miles of La Grande.  I spoke with four local vendors about what portion of their equipment and supplies are purchased locally.  Their estimates ranged between 25% and 80%, averaging around 60%.  “I buy the majority of my supplies here,” says Denise Arnold, who sells handmade clothing, bags, and jewelry at the market “probably 75% of what I spend is here in town.”  This was echoed by all of the vendors I spoke with.  “The only time I spend money out of town is when I can’t get it here,” says John Scott, a market farmer from Cove who estimates 80% of his business purchases this year were made locally.  Ned Bayly of Northeast Farms in Cove summed it up by saying “I think all of us prefer to shop here for convenience as well as buying from people we know.”

It is inevitable that some of our money is going to leave the area eventually, but the longer we keep it here the more good it does for our local economy.  Not only are you getting the freshest, tastiest tomatoes available when you shop at the farmers’ market.  You are also supporting our local economy by giving your dollar another chance to travel through town.

By Julie Keniry, originally posted in 2005