Purchasing Power to Build Local Wealth

Purchasing Power to Build Local Wealth

A basic assumption of a Wellbeing Economy is that individuals and communities have the money and resources they need to thrive. When money leaves a community it is “extracted” from the local economy and has a spiral down effect on the total amount of money in a community. When money stays in the community, it not only stays local, but expands local opportunities for more and more creation – an upward spiral. This is what it means to “build local wealth.” 

Economies are complex, but one key factor in reducing the amount of local wealth, thereby driving more people into lower income brackets, was the move from the majority of businesses being locally owned to consolidation into big corporations that operate in multiple states or internationally.

This takes many forms, but let’s use the example of hardware stores. Over the last 30 years, the expansion of Home Depot and Lowe’s has led to the closing of most locally owned hardware stores. This has multiple effects on wages. It reduces the number of available jobs in an area.  As a large employer they are able to be more aggressive in their management, which creates lower wages, reduces employee benefits and other forms of instability for workers. The overall effect is less  “quality” jobs available. Admittedly, a large warehouse hardware store creates benefits to a community too, but it must be weighed against the cost of extracting wealth from a community. The profits go to the headquarters and the shareholders of the company; not to the workers and owners who live in the community.

We call this an Extractive Economy.

Our goal is to create a “Regenerative Local Economy” where the the aim is to keep as much money inside the local community and region as possible–investing in the wellbeing of its citizens. Local wealth building might seem like a small change, but it can have a major impact.

The Democracy Collaborative is an example of an organization committed to helping communities rebuild community wealth. They use the term “Anchor Institution” to describe large organizations with substantial purchasing power that are tied or “anchored” to the local community. Some examples of these anchors are City Governments, Universities, School Systems, Hospitals, and Community Foundations. If these Anchor Institutions are committed to improving their community’s wellbeing, perhaps their substantial purchasing power can be directed to prioritize buying from locally owned businesses. This helps existing local businesses flourish and further stimulates the creation of more local businesses.

This generates even greater opportunities within the community. Buying local could be a community wide effort that includes the local Chamber of Commerce, as a means of investing in the local community. You can further extend the effects by creating Employee Owned Businesses that service the Anchor Institutions. 

To give you a sense of how impactful this can be, the Democracy Collaborative estimates that Hospitals and Universities alone account for 9% of US GDP. Hospitals alone employ over 1 million people and spend over 50 billion in purchasing annually!



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