5 ms·

Well, when you spend your money in a local economy the money tends to circulate back around. Say I shop from a farmer's market, I support people living in my co

by lotusleaf1987 16y ago

Well, when you spend your money in a local economy the money tends to circulate back around. Say I shop from a farmer's market, I support people living in my community who can then spend that money on other local goods/services, and eventually some of that money may make it's way back to myself. If I shop at Wal-Mart, the money leaves my local economy forever and basically just goes to shareholders and overseas manufactures. I also think local merchants are more likely to sell goods/services that are better for their local economy than a big box retailer that is completely disconnected from the local economy.

pavel_lishin 16y ago
So the reason it's moral is because you might get the money back? Isn't that just self-interest?
yummyfajitas 16y ago
This claim is ridiculous. Your mental model of the economy involves tracking the movement of a particular dollar bill and ignoring the movement of dollar bills which start at distant locations. This is a fallacy. If you shop at Walmart, that particular dollar bill is put on a truck and sent to Walmart Secret World Headquarters hundreds of miles away, and it eventually makes it's way to producers a world away from you. On the other hand, Walmart (and other businesses located hundreds of miles away) will buy goods from your locality, ship them to other distant locals, and send you a different dollar bill in return. The fundamental issue is whether gains due to comparative advantage > shipping/logistics costs. As a result of shipping/logistics costs dropping rapidly (walmart has been a pioneer here), the non-local goods have won out. (Granted, none of this has anything to do with the morality of giving a job to a guy named Jose instead of a guy named Joe.)
- defen 16y ago
  21st century mercantilism. One problem with the modern system is that it seems to be an unstable equilibrium - it's more efficient, but what happens if the global logistics infrastructure breaks down because of war/rising oil prices/political turmoil etc? It seems that we (meaning communities/regions/the US) have given up self-sufficiency in exchange for this increased efficiency, which surely has some sort of cost.
  - azanar 16y ago
    what happens if the global logistics infrastructure breaks down because of war/rising oil prices/political turmoil etc? What happens if some local infrastructure breaks down in a way that that the local community is put to a standstill until things get fixed? A good example of this: a major highway bridge becomes impassible in a way that is not trivial to repair. The lack of this bridge becomes a huge expense and drain on quality of life in the region. You can either ride of self-sufficiency to get this bridge rebuilt, or you can rely on the efficiencies of volume producers of raw materials, machinery, and whatever else you'll need to build that bridge back up. Self-sufficiency, in the sense that you exchange with few or no other people for your own wants and needs has huge costs as well; but, because most of us aren't self-sufficient in that sense, we tend to romantically gaze in that direction and only remember all the good that comes out of being self-sufficient. The trade-offs are not that obvious and one-sided.
    - yummyfajitas 16y ago
      What happens if some local infrastructure breaks down in a way that that the local community is put to a standstill until things get fixed? In a non-networked world, the problem is limited to the local community. In a networked world, everyone is harmed. It's pretty easy to see that there are tradeoffs to be made between reliability and efficiency. As we become dependent on products which are centrally produced (very efficiently) and widely distributed, we all become vulnerable when a disaster strikes the producers. I personally believe that the efficiency gains outweigh the reliability losses, but that doesn't mean the tradeoffs don't exist.
      - azanar 16y ago
        As we become dependent on products which are centrally produced (very efficiently) and widely distributed, we all become vulnerable when a disaster strikes the producers. True, and I tend to underestimate just how centralized the production of a lot of things are, since what I do isn't really based that heavily on geographic location. My counter to that, though, is that there is usually at least a couple of producers of most products, and that sometimes -- though not always -- they are geographically separated enough that the risk is somewhat mitigated. Other times, though, geographic constraints sort of mandate that every supplier be located within a small number of miles of one another; suppliers of natural resources (coal, oil, etc) come immediately to mind.
- lotusleaf1987 16y ago
  Where did I say anything about tracking a particular dollar? If I spend my money at a local restaurant that uses local produce/local products and is a small business, that's much better for my local economy than going to say Outback Steakhouse/Olive Garden etc. where they don't pay their employees well and the money I've spent is literally leeched out of my local economy. Whereas, by going to the local restaurant the money will go back into the local economy. For every one job Wal-Mart hires, it kills 1.5 jobs in the local economy. It's called the Wal-Mart effect and several studies have shown this: One 1999 study reported that 1.5 jobs had been lost for every job that Wal-Mart created. A recent projection by the University of Illinois at Chicago’s Center for Urban Economic Development concluded that the proposed West-Side Chicago store likely would yield a net decrease of about 65 jobs after that Wal-Mart opens, as other retailers in the same shopping area lose business. A study cited in Business Week as showing modest retail gains after Wal-Marts open actually reported net job losses counting effects on warehousing and surrounding counties. http://www.inthesetimes.com/article/the_wal_mart_effect/ http://www.inthesetimes.com/article/the_wal_mart_effect/ But “Walmartization of America has a broader impact than just retail workers,” says Greg Denier, spokesman for the United Food and Commercial Workers, which represents grocery workers. “Wal-Mart probably has had more negative impact on manufacturing than on other jobs in the United States.” Wal-Mart also squeezes American consumer goods producers, forcing them to cut labor costs, move overseas or be replaced by foreign suppliers. Accounting for 10 percent of all U.S. imports from China in 2002, the corporation even pressures wages downward in poor countries, from El Salvador to Bangladesh. It also drives competitors to import more, pushing the True Value hardware store cooperative to boost imports from less than 1 percent of its products to 18 percent. It's moral not to put my neighbors out of business and look out for one another. You are your brother's keeper, I think is the phrase. (I am completely atheist, but I still think this is true.) Sometimes what's in your own self-interest is also moral, there's no reason those two qualities are mutually exclusive. How is this so controversial? It's common sense.
  - yummyfajitas 16y ago
    Where did I say anything about tracking a particular dollar? Your entire post discussed the circulation of money in the local economy, and said nothing whatsoever about money coming into the local economy. Unless Walmart plans to keep providing your local economy with low cost steaks forever, and get nothing in return, money will eventually need to return. But it might be a different dollar bill spent by a different purchaser. If I spend my money at a local restaurant that uses local produce/local products and is a small business, that's much better for my local economy than going to say Outback Steakhouse/Olive Garden etc. where they don't pay their employees well and the money I've spent is literally leeched out of my local economy. If the money leaves your local economy, that's a good thing. It means you traded some inedible green paper for a delicious steak. Your community has gained, the outside world has lost. If, in turn, someone trades green pieces of paper for products produced in the community, you gain less - you gain 1 steak but lose some eggplants. (Of course, the community with a surplus of steaks and a shortage of eggplants considers the opposite trade a gain.) It wouldn't surprise me if walmart destroys retail jobs - they are fantastically efficient. Computers and the internet have also destroyed many jobs (newspapers, for example). Money no longer circulates around the local economy. Is this also a bad thing? Destroying jobs through increasing productivity is generally a good thing. I've discovered a very enlightening way to think about such questions: explain the harm in terms of goods and services, without mention of green pieces of paper. E.g., "the housing bubble was bad because we labor and materials building houses we didn't need." Can you provide a similar explanation of the harm caused by walmart? It's moral not to put my neighbors out of business and look out for one another. Why is it moral to put a much poorer Chinese person out of business? Is the Mexican farmer selling goods to Walmart somehow less of a human being than your wealthy neighbor?
azanar 16y ago
If I shop at Wal-Mart, the money leaves my local economy forever and basically just goes to shareholders and overseas manufactures. This is only the case if no one who gets money, either directly or indirectly, from Wal-Mart wants to buy any of the stuff your local economy was making. Think of all the people all around the world who get money from Wal-Mart. If none of these people want to buy anything you and your fellow townsmen make, then you are absolutely right that the money leaves your local economy forever. But this points to a deeper pathology. You want something people outside your community provide (through Wal-Mart or whatever), but you refuse to give back an equal amount of value for what you extract. Because of this expectation, you rail against anything non-local. This is how trade deficits get started, and the solution to them is not to scream for a reemergence of isolationist economic policy, which is essentially your concept of a self-circulating local economy. The solution is to realize that other people want you to do things for them when they do things for you, and to get over this quaint notion of historic mainstreet town life if you really want the things that a big box style economy provides. You can't have both unless you want to go broke. I also think local merchants are more likely to sell goods/services that are better for their local economy than a big box retailer that is completely disconnected from the local economy. Can you back this up, or are you waxing sentimental? As far as the flow of capital is concerned, a big box retailer provides a lot for a local economy because people spend a lot of money there. They're winning as far as cash flow goes, which means they are giving people what they want, even if they whine about getting it. If nothing else, I think this shows that local economies aren't as special and unique as people claim they are; it's like the Lake Wobegon Effect for retail. Your local economy is not that special, your locality is not that special, and your fight to remain isolated in all the ways you think matter while becoming interconnected with other communities in all the ways you are willing to tolerate is going to backfire, because you come across expecting more from others than they are allowed to expect from you. If you want that money back, then do something that makes people want to give it back to you. It's as simple as that.
- lotusleaf1987 16y ago
  I don't understand why some people on HN are so needlessly condescending: Can you back this up, or are you waxing sentimental? Why would I even want to discuss something with someone with such an unnecessary rude and snarky attitude? Yes, I can back this up... go into your local pizza shop/taco stand/burger joint/Italian restaurant/seafood shack and get a pizza/burrito/burger/pasta/fish and compare the ingredients to Pizza Hut. One is made out of a bunch of "edible food-like substances" (to quote Michael Pollan) the other is made with actual food. Quote: Wal-Mart sells cheaply and uses fewer workers partly because it is a technological and organizational innovator, but its success depends even more on its relentless pressure on workers and suppliers, and its extraordinary market power is by far the dominant retailer of many goods. The corporation is likely to control 35 percent of all U.S. food and drug sales by 2007. Wal-Mart also shifts many of its costs to taxpayers (or other businesses that indirectly pay costs of Wal-Mart’s underinsured employees). A recent study by Good Jobs First, an organization that monitors economic development policies, found that state and local governments had given at least $1 billion in subsidies to stores and distribution centers. Wal-Mart also pays so little that many of its workers rely on state healthcare subsidies, food stamps, housing vouchers and other public aid. According to a recent study by the University of California at Berkeley Center for Labor Research and Education, California alone spends $10 billion annually to subsidize Wal-Mart and similar low-wage employers. Congressional Democratic staff calculates that federal taxpayers pay $2,103 per year in subsidies for the average Wal-Mart worker. Source: http://www.inthesetimes.com/article/the_wal_mart_effect/ http://www.inthesetimes.com/article/the_wal_mart_effect/
grannyg00se 16y ago
Consider the "local economy" as the entire planet. There is no reason to expect that "local" has to mean your own country. Goods, currency and labour are all placed on a global platform for competition. If you are concerned with trying to sandbox your bit of currency into a particular geographical area then you are fighting a loosing battle because there is no real reason to do that. I don't see any reason why a local merchant would be interested in selling goods/services that are somehow better for their local economy. They will attempt to sell what sells best. As will the big box store.

pavel_lishin 16y ago

So the reason it's moral is because you might get the money back? Isn't that just self-interest?

yummyfajitas 16y ago

This claim is ridiculous. Your mental model of the economy involves tracking the movement of a particular dollar bill and ignoring the movement of dollar bills which start at distant locations. This is a fallacy. If you shop at Walmart, that particular dollar bill is put on a truck and sent to Walmart Secret World Headquarters hundreds of miles away, and it eventually makes it's way to producers a world away from you. On the other hand, Walmart (and other businesses located hundreds of miles away) will buy goods from your locality, ship them to other distant locals, and send you a different dollar bill in return. The fundamental issue is whether gains due to comparative advantage > shipping/logistics costs. As a result of shipping/logistics costs dropping rapidly (walmart has been a pioneer here), the non-local goods have won out. (Granted, none of this has anything to do with the morality of giving a job to a guy named Jose instead of a guy named Joe.)

defen 16y ago
21st century mercantilism. One problem with the modern system is that it seems to be an unstable equilibrium - it's more efficient, but what happens if the global logistics infrastructure breaks down because of war/rising oil prices/political turmoil etc? It seems that we (meaning communities/regions/the US) have given up self-sufficiency in exchange for this increased efficiency, which surely has some sort of cost.
- azanar 16y ago
  what happens if the global logistics infrastructure breaks down because of war/rising oil prices/political turmoil etc? What happens if some local infrastructure breaks down in a way that that the local community is put to a standstill until things get fixed? A good example of this: a major highway bridge becomes impassible in a way that is not trivial to repair. The lack of this bridge becomes a huge expense and drain on quality of life in the region. You can either ride of self-sufficiency to get this bridge rebuilt, or you can rely on the efficiencies of volume producers of raw materials, machinery, and whatever else you'll need to build that bridge back up. Self-sufficiency, in the sense that you exchange with few or no other people for your own wants and needs has huge costs as well; but, because most of us aren't self-sufficient in that sense, we tend to romantically gaze in that direction and only remember all the good that comes out of being self-sufficient. The trade-offs are not that obvious and one-sided.
  - yummyfajitas 16y ago
    What happens if some local infrastructure breaks down in a way that that the local community is put to a standstill until things get fixed? In a non-networked world, the problem is limited to the local community. In a networked world, everyone is harmed. It's pretty easy to see that there are tradeoffs to be made between reliability and efficiency. As we become dependent on products which are centrally produced (very efficiently) and widely distributed, we all become vulnerable when a disaster strikes the producers. I personally believe that the efficiency gains outweigh the reliability losses, but that doesn't mean the tradeoffs don't exist.
    - azanar 16y ago
      As we become dependent on products which are centrally produced (very efficiently) and widely distributed, we all become vulnerable when a disaster strikes the producers. True, and I tend to underestimate just how centralized the production of a lot of things are, since what I do isn't really based that heavily on geographic location. My counter to that, though, is that there is usually at least a couple of producers of most products, and that sometimes -- though not always -- they are geographically separated enough that the risk is somewhat mitigated. Other times, though, geographic constraints sort of mandate that every supplier be located within a small number of miles of one another; suppliers of natural resources (coal, oil, etc) come immediately to mind.
lotusleaf1987 16y ago
Where did I say anything about tracking a particular dollar? If I spend my money at a local restaurant that uses local produce/local products and is a small business, that's much better for my local economy than going to say Outback Steakhouse/Olive Garden etc. where they don't pay their employees well and the money I've spent is literally leeched out of my local economy. Whereas, by going to the local restaurant the money will go back into the local economy. For every one job Wal-Mart hires, it kills 1.5 jobs in the local economy. It's called the Wal-Mart effect and several studies have shown this: One 1999 study reported that 1.5 jobs had been lost for every job that Wal-Mart created. A recent projection by the University of Illinois at Chicago’s Center for Urban Economic Development concluded that the proposed West-Side Chicago store likely would yield a net decrease of about 65 jobs after that Wal-Mart opens, as other retailers in the same shopping area lose business. A study cited in Business Week as showing modest retail gains after Wal-Marts open actually reported net job losses counting effects on warehousing and surrounding counties. http://www.inthesetimes.com/article/the_wal_mart_effect/ http://www.inthesetimes.com/article/the_wal_mart_effect/ But “Walmartization of America has a broader impact than just retail workers,” says Greg Denier, spokesman for the United Food and Commercial Workers, which represents grocery workers. “Wal-Mart probably has had more negative impact on manufacturing than on other jobs in the United States.” Wal-Mart also squeezes American consumer goods producers, forcing them to cut labor costs, move overseas or be replaced by foreign suppliers. Accounting for 10 percent of all U.S. imports from China in 2002, the corporation even pressures wages downward in poor countries, from El Salvador to Bangladesh. It also drives competitors to import more, pushing the True Value hardware store cooperative to boost imports from less than 1 percent of its products to 18 percent. It's moral not to put my neighbors out of business and look out for one another. You are your brother's keeper, I think is the phrase. (I am completely atheist, but I still think this is true.) Sometimes what's in your own self-interest is also moral, there's no reason those two qualities are mutually exclusive. How is this so controversial? It's common sense.
- yummyfajitas 16y ago
  Where did I say anything about tracking a particular dollar? Your entire post discussed the circulation of money in the local economy, and said nothing whatsoever about money coming into the local economy. Unless Walmart plans to keep providing your local economy with low cost steaks forever, and get nothing in return, money will eventually need to return. But it might be a different dollar bill spent by a different purchaser. If I spend my money at a local restaurant that uses local produce/local products and is a small business, that's much better for my local economy than going to say Outback Steakhouse/Olive Garden etc. where they don't pay their employees well and the money I've spent is literally leeched out of my local economy. If the money leaves your local economy, that's a good thing. It means you traded some inedible green paper for a delicious steak. Your community has gained, the outside world has lost. If, in turn, someone trades green pieces of paper for products produced in the community, you gain less - you gain 1 steak but lose some eggplants. (Of course, the community with a surplus of steaks and a shortage of eggplants considers the opposite trade a gain.) It wouldn't surprise me if walmart destroys retail jobs - they are fantastically efficient. Computers and the internet have also destroyed many jobs (newspapers, for example). Money no longer circulates around the local economy. Is this also a bad thing? Destroying jobs through increasing productivity is generally a good thing. I've discovered a very enlightening way to think about such questions: explain the harm in terms of goods and services, without mention of green pieces of paper. E.g., "the housing bubble was bad because we labor and materials building houses we didn't need." Can you provide a similar explanation of the harm caused by walmart? It's moral not to put my neighbors out of business and look out for one another. Why is it moral to put a much poorer Chinese person out of business? Is the Mexican farmer selling goods to Walmart somehow less of a human being than your wealthy neighbor?

azanar 16y ago

If I shop at Wal-Mart, the money leaves my local economy forever and basically just goes to shareholders and overseas manufactures. This is only the case if no one who gets money, either directly or indirectly, from Wal-Mart wants to buy any of the stuff your local economy was making. Think of all the people all around the world who get money from Wal-Mart. If none of these people want to buy anything you and your fellow townsmen make, then you are absolutely right that the money leaves your local economy forever. But this points to a deeper pathology. You want something people outside your community provide (through Wal-Mart or whatever), but you refuse to give back an equal amount of value for what you extract. Because of this expectation, you rail against anything non-local. This is how trade deficits get started, and the solution to them is not to scream for a reemergence of isolationist economic policy, which is essentially your concept of a self-circulating local economy. The solution is to realize that other people want you to do things for them when they do things for you, and to get over this quaint notion of historic mainstreet town life if you really want the things that a big box style economy provides. You can't have both unless you want to go broke. I also think local merchants are more likely to sell goods/services that are better for their local economy than a big box retailer that is completely disconnected from the local economy. Can you back this up, or are you waxing sentimental? As far as the flow of capital is concerned, a big box retailer provides a lot for a local economy because people spend a lot of money there. They're winning as far as cash flow goes, which means they are giving people what they want, even if they whine about getting it. If nothing else, I think this shows that local economies aren't as special and unique as people claim they are; it's like the Lake Wobegon Effect for retail. Your local economy is not that special, your locality is not that special, and your fight to remain isolated in all the ways you think matter while becoming interconnected with other communities in all the ways you are willing to tolerate is going to backfire, because you come across expecting more from others than they are allowed to expect from you. If you want that money back, then do something that makes people want to give it back to you. It's as simple as that.

lotusleaf1987 16y ago
I don't understand why some people on HN are so needlessly condescending: Can you back this up, or are you waxing sentimental? Why would I even want to discuss something with someone with such an unnecessary rude and snarky attitude? Yes, I can back this up... go into your local pizza shop/taco stand/burger joint/Italian restaurant/seafood shack and get a pizza/burrito/burger/pasta/fish and compare the ingredients to Pizza Hut. One is made out of a bunch of "edible food-like substances" (to quote Michael Pollan) the other is made with actual food. Quote: Wal-Mart sells cheaply and uses fewer workers partly because it is a technological and organizational innovator, but its success depends even more on its relentless pressure on workers and suppliers, and its extraordinary market power is by far the dominant retailer of many goods. The corporation is likely to control 35 percent of all U.S. food and drug sales by 2007. Wal-Mart also shifts many of its costs to taxpayers (or other businesses that indirectly pay costs of Wal-Mart’s underinsured employees). A recent study by Good Jobs First, an organization that monitors economic development policies, found that state and local governments had given at least $1 billion in subsidies to stores and distribution centers. Wal-Mart also pays so little that many of its workers rely on state healthcare subsidies, food stamps, housing vouchers and other public aid. According to a recent study by the University of California at Berkeley Center for Labor Research and Education, California alone spends $10 billion annually to subsidize Wal-Mart and similar low-wage employers. Congressional Democratic staff calculates that federal taxpayers pay $2,103 per year in subsidies for the average Wal-Mart worker. Source: http://www.inthesetimes.com/article/the_wal_mart_effect/ http://www.inthesetimes.com/article/the_wal_mart_effect/

grannyg00se 16y ago

Consider the "local economy" as the entire planet. There is no reason to expect that "local" has to mean your own country. Goods, currency and labour are all placed on a global platform for competition. If you are concerned with trying to sandbox your bit of currency into a particular geographical area then you are fighting a loosing battle because there is no real reason to do that. I don't see any reason why a local merchant would be interested in selling goods/services that are somehow better for their local economy. They will attempt to sell what sells best. As will the big box store.