2 – The global versus the local economy

Why is it that multinational companies are so successful? Because the public supports them by buying their products and services. Think about it – If restaurant A didn’t have customers going there regularly, it would collapse as a business. It depends on the public and without them, it couldn’t survive. So this means that effectively, small businesses that offer the same things which are a bit more expensive because they can’t afford to sell them more cheaply struggle to survive. The customers go to cheaper places and the small businesses close. Of course, we can’t just blame the public outright; some people need to buy cheaper versions of the items being sold because they don’t have the money to support the local businesses. So, are we in a Catch 22 situation where we simply have to support the multinationals? For the answer to this, I refer to the New Economics Foundation for their explanation of what happens:

“Imagine the local economy as a bucket. If someone has £5 and spends it in the local grocers, the £5 stays in the bucket. But other activities, such as paying utility bills, or spending money in out-of-town stores, causes money to leak out of the bucket, away from the community. By plugging the leaks in the bucket, we can keep money flowing within community and create strong local economies.” (See the nef website for more details)

In other words, if you spend money on products that have been imported and/ or in shops that have their headquarters in a different city or country, that money goes out of the community but if you bought local products from local businesses, the money would stay in the community.

(Click here to see a 2 minute explanation of how the economy has been operating.)

The public is also increasing the rich-poor divide because they are spending their money on things that make the big companies richer still.

Therefore, spending locally, on local services and products would keep the money in the community and prevent the increase of the rich-poor divide. Sounds too simple? Maybe, but this is how it works. The difficulty is, like I said, that it is not always possible to support the local businesses and people generally choose to spend the least amount of money on their products, which makes sense.
But, on the other hand, by spending more locally when it is possible, the public would actually be doing themselves favours, both individually and communally.

If people made an effort to buy local products, some of the money would then be staying in the community. Even if for every 10,000 credits, 6,000 credits stayed there, it would have a significant, positive effect on the local economy. Basically, the people would be keeping hold of more of their money, which would be transferred around through local trade. An attempt to promote this has been done in the UK with local currencies, such as the Brixton Pound. This is a locally produced currency that was developed by the nef and endorsed by Lambeth council. The way it works is that people buy this money and shops advertise that they accept it as payment. This money can only be used in Brixton and is of no value anywhere else so it guarantees that it stays in the community. Visit Brixton Pound for more information.

 

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