You will be assimilated
23 July 2014 17:53 (South Africa)
Opinionista Ivo Vegter

Buy local, support poverty

  • Ivo Vegter
There's a widespread myth among consumers that buying locally is good for the economy, the environment or both. Despite its charming appeal, it is neither. Worse, producers will do their best to make sure you're never any the wiser about it.

Imagine a world in which you bought everything locally. Your food comes from your own garden, or from small farms on the outskirts of your town. Your household implements come from local potters and blacksmiths. Your furniture is made in the joinery down the road, from what's left of the forest behind town. When you're sick, you visit the only doctor within a day's travel, and when you need a loan to pay for it, you go to see your father's banker, because he's the only banker you know. When your locally made vehicle needs a service, you use Local Joe's Towing, Repairs, and Used Wagon Sales, because Local Joe is the only wagon mechanic in town.
If this world sounds strangely familiar, it is because we all know this world from our common history. The world once did look like that. We called it the Middle Ages.

Thing is, during the Middle Ages, unless you were one of the very few people who were born into nobility, you were likely very poor. And even if you were lucky enough to be among the land-owning gentry, you'd still have a life expectancy on the wrong side of 40, bury half your children before they're five, lose your limbs to gangrene, and die of tuberculosis.

The world is a different place today because trade has made it so. Merchants brought the best goods at the best prices from far away to your local high street. You could find the best doctors, lawyers or wagon mechanics from all over the realm, and eventually the world. Trade created what we know today as the middle class.

There are several reasons trade has had such a tremendous impact on human prosperity, or quality of life.

The revolution in transport, from human-powered to animal-driven to motorised and even airborne travel has given us the ability to buy from further afield. More choice meant better quality and lower prices, depending on our desires and our means.

In turn, this created competition among producers to set up their operations where they could find the best combination of resources, labour and infrastructure, in the hope of serving customers better than their rivals. Advances in technology both spurred, and were spurred by, this rise in competition. There is little reason to automate a task if you can't find more buyers in your local town. If you can reach the world, however, then every task done slightly faster or slightly cheaper constitutes an improvement to your product, a blow against your competition, and a rise in prosperity for both you and your customer.

The ability to draw on a larger pool of people has made more efficient division of labour possible. Instead of doing one's own books, or working as a specialist bookkeeper but only having enough work at month-end, we can now hire entire firms that specialise in accounting. Local Joe can now focus on what he is best at, and a combination of competition and economy of scale raises his quality and lowers his costs.

Trading increases our wealth, because it enables us to produce (or procure) more for the same amount of resources, or the same amount for less. Our time, money and skills either go further, or what we save can be redeployed elsewhere to improve our standard of living.

Why, then, do we expect that reversing this trend – as the “buy local” fad encourages – will have positive effects?

Advocates of buying local say that doing so saves resources that otherwise would have been devoted to transport, and that it sustains local jobs. This may be true in isolation, but these supposed benefits come at a cost.
Henry Hazlitt, in his must-read book, Economics in One Lesson, points out that "the art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."

Buying local means to refuse a product that is better, cheaper, or both, simply because it isn't made here. (Otherwise, you'd buy it anyway, and few advocates of buying local will be consistent and refuse to sell to buyers from out of town.) Unless a product's origin is an intrinsic part of its value, however, choosing a more expensive or lower quality product just because it is local wastes resources instead of saving them.

There may be good reasons for buying local, such as freshness or a personal relationship with a producer, but saving resources is not among them.

The employment argument is equally untenable. Why is it better to employ people in less efficient companies, instead of where they can be more productive? And why should consumers, not all of whom can afford such largesse, be asked to pay the premium to keep them so inefficiently employed?

Moreover, if you follow this to its logical extreme, where do you stop? How local is “local”? Do you continue until everything you consume is produced by you? And how much is your time and effort worth? Would it not be worth more to you, and implicitly to others, if it were spent on something you're really good at, rather than on a wide range of small-scale attempts to supply your own demand?

If everyone so inefficiently allocates their time, it stands to reason that the economy suffers a net loss of productivity, and not a net gain. Economies of scale are destroyed, as we revert to the burdensome labour for precious little gain that characterised pre-modern times. Division of labour, which allocates different elements of production to those people best qualified to do so efficiently, is reversed, though it lies at the heart of economic progress. The comparative advantage of certain regions for producing certain things, because of, say, resource availability or climate, is removed from the economic equation. All the economic factors that have combined to produce such admirable prosperity gains over the centuries are reversed by the notion of buying local.

What about carbon emissions and pollution? Should one not on environmental grounds eschew goods that had to be transported a long distance? Again, on balance, the answer is no. It is more efficient to produce something on a large scale. Replicating a few large operations with many small-scale alternatives will likely require more tools, more raw materials, and more energy overall. Bigger operations can amortise capital and operating costs (including energy) over a larger output. Land can be used more intensively and efficiently by larger concerns, again benefiting the environment.

Determining the so-called externalities in the supply chain can be a complex and expensive process, often exceeding the potential benefit of doing so. In most cases, price is as good a proxy as any for energy input, since energy needs to get paid for. And if you still believe buying local will somehow limit emissions, and that doing so is worth it for its own sake, you'd be grasping at straws. A study of carbon emissions over the production cycle of food, for example, shows that only a small fraction is attributable to transport from producer to retailer. Four fifths is caused by production, and it's a safe bet that small farms emit more emissions in aggregate than efficient, large-scale operations.

There's also a fairness argument, or a “don't shoot yourself in the foot” argument, depending on how you phrase it. By excluding imported goods from consideration, we're harming foreign producers, not on fair grounds such as price or quality, but simply because they're not like us. How can we expect access to their markets if we deny them access to ours? Even if a “buy local” campaign did benefit us locally, a similar campaign in a big country harms small countries much more. We should encourage Americans and Europeans to buy South African, not make such silly demands of each other.

Since every claim made about “buy local” campaigns turns out to be bogus, why, then, do they appear to have such popular appeal? There's the charm of buying produce at local markets, to be sure. Of knowing the chair maker or strawberry farmer, or being able to select fresher, higher-quality or custom-made products. But if this was all there was to it, the market alone would favour smaller, local producers, and “buy local” campaigns would be pointless.

Yet all over the world, you see “Buy American” or “Proudly South African” slogans. Eco-posers of the fashionable kind smugly describe themselves as “locavores”. These campaigns might appeal to patriotic instincts, or soothe the guilt complexes of the wealthy, but they perpetuate both environmental and economic myths.

In the bad old days, the National Party ran an autarky campaign known as “Koop Suid-Afrikaans / Buy South African”. The reason? The rest of the world refused to sell stuff to racist oppressors. The country had to become self-sufficient, not out of choice, but because other countries wanted to place economic pressure on South Africans, in the hope that they'd find it unsustainable to continue supporting the Apartheid State. It worked.

So why does it now make sense to impose exactly those same sanctions on ourselves?

It doesn't, of course, unless you want to get Freudian about our national psyche.

Or, unless you're a local producer and you can't compete on the merits with larger or more efficient competitors elsewhere. Then you'll gladly pay a racketeer protection money for the privilege of displaying the national flag, and promoting the idea that customers are doing good by choosing your product over those of your competitors. Your motivation for seeking such protectionism, of course, is neither patriotic nor altruistic, but purely self-interested.

It is marketing of the worst kind: misleading and harmful. It punishes truly good companies that are able to compete on the merits, because they either don't come from the right side of the rail-road tracks or they have to wear a “lowest common denominator” badge denoting that they do. And whichever way you analyse it, it drains wealth out of the economy instead of producing more prosperity.

Buy the best you can get at a price you can afford. It isn't that complicated. “Buy local” only benefits governments and corporate special interests. “Buy local” only makes sense to jingoists and environmentalists. That, really, is all you need to know about it. DM

  • Ivo Vegter
IvoVegterBW

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He approaches issues from the perspective of individual liberty and free markets. He grew up in the deep south of Johannesburg, and learnt his politics reading the Weekly Mail and Vrye Weekblad at Wits University during the early years of the country's transition to democracy. He recently left the city for the lower cost of living of Knysna, where he continues to write about everything under the sun. He is always right.

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