Going Local The Impact of Institutions on the Local

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					                Going Local:
The Impact of Institutions on the Local Economy

             Richard Schramm


           Community Development
                   UNH
             February 26, 2009
                   Overview

• Theory: Why Localization?
• Goal: More Self-Reliant and Sustainable Local
Economy
• Strategy: Local Ownership/Import Substitution
• Tactics
   • Planning, Entrepreneuring, Business Alliances,
   Investing, Policy Making
   •   Local Purchasing (UVM)
• BALLE
   Our Perception of Globalization




Michael Shuman
          Why Localization?
• Price versus Place/Direct and Indirect
Costs
• Stability through Local Ownership
• Community through Local Support
• Economic Vitality through higher
multipliers (buying from one another)
• Social and Environmental Responsibility
through direct interaction
• Environmental Restoration through
reduced transportation
   Building a More Self-Reliant Sustainable
                  Economy
• Develop and Support Community Enterprises

• Promote Local and Cooperative Ownership

• Build Business Culture of Social & Environmental
Responsibility

• Produce More of What Currently Import (Import
Substitution)

• Strengthen Local Economic Multipliers

• Reduce Consumption and Conserve Resources
         Size of Community Enterprise Sector

                       U.S. GDP
                 70%
                 60%
                 50%
                 40%
                 30%
                 20%
                 10%
                 0%

                          Small Buz
                          Nonprofit
                          State/Local
Michael Shuman            Federal
      Emerging Community Strategies
  Planning             Plug the leaks.


  Entrepreneuring      Support local entrepreneurs.


  Business Alliances   Compete through collaboration.


  Investing            Harness pensions locally.


  Purchasing           Spearhead “Local First” campaigns.


  Policymaking         Remove all anti-community enterprise
                       biases.


Michael Shuman
                 Local First Tools
 • Coupon Books

 • Labels

 • Buy Local Weeks

 • Local Gift Cards


Michael Shuman
                 Local First Tools
 • Coupon Books

 • Labels

 • Buy Local Weeks

 • Local Gift Cards


Michael Shuman
                 Local First Tools
 • Coupon Books

 • Labels

 • Buy Local Weeks

 • Local Gift Cards


Michael Shuman
                 Local First Tools
 • Coupon Books

 • Labels

 • Buy Local Weeks

 • Local Gift Cards


Michael Shuman
  UVM Economic Impacts Project
         (1999-2003)
• Use UVM employment and
  purchasing practices to increase
  support for workforce and business
  development for Old North End
  residents

• Focus on UVM $300 million annual
  budget, about $160 million for
  personnel, $140 for purchases of
  goods and service
     Why Should UVM Buy Locally and Within State?
·   UVM Mission to Support the State

·   Support Existing Businesses, their Employees and Communities

·   Develop New Businesses within Vermont. Diversify Economy

·   Create Positive Multiplier Effects on Employment, Income and Earnings

·   Reduce Environmental and Social Costs from Out-Of-State Purchasing (e.g.
associated with transportation)

·   Build Closer Relations between UVM and Vermont Businesses. Develop
Stable Partnerships. Greater Awareness of Negative Impacts (Externalities)

·   Can Have Impact - $300 Million Budget (60% Employment; 40% Goods and
Services)

·   Weigh Against Issues of Cost, Quality, Delivery, Reliability, etc.
    Local Business Strategies
• Help Local Business Sell to UVM
  • Developed and Distributed 500
    Copies of “How to Do Business with
    UVM”

• Increase Local Purchasing by UVM
   • Inform and encourage buying local
     within UVM
   • Analyzed UVM purchasing patterns
     and developed Targeted Buy Local
     Policy
   Types of UVM Expenditures on Goods and Services

·    UVM purchases for fiscal year 2000 was about $136.4 million.
·    Categorized all UVM purchases by industrial sector
(Standard Industrial Classification – SIC code) for fiscal year 2000.
·    Consisted of 8,250 individual purchases across almost 400
sectors.
·    Eliminated international purchases, individual purchases less
than $750, purchases unidentifiable by sector or location, and non-
wage purchases from individuals.
·    Result was $106.8 million of purchases that could be identified
and described in standard industrial classification (SIC). 79% of
Total.
·    $106.8 million was paid out to 2816 vendors from 382
industries each with their own standard industrial classification
    UVM Purchases By Economic Sector - 2000
                                                 Purchase        Percent of
                   Sector                      (in millions)   Total Purchases
Services                                          $28.29            26.5%
Trade Contractors                                 $19.42           18.2%
Manufacturing                                     $16.94           15.9%
Retail Goods                                      $13.83           13.0%
Financials and Real Estate                        $9.22             8.6%
Utilities                                         $7.25             6.8%
Wholesale Goods                                   $4.75             4.5%
Transportation                                    $3.39             3.2%
Communications                                    $1.70             1.6%
Government                                        $1.67             1.6%
Natural Resources                                 $0.34             0.3%
Totals*                                          $106.83*          100%*


                 *Totals differ because of rounding
              In and Out of State Purchases
                         (2000)

Of the $106 million:

·   56%, or $59.8 million, was purchased from 923 Vermont
vendors.

·   44%, or $47.0 million, was purchased from 1,893 vendors
throughout the United States (outside of Vermont).

The amount of in-state purchases as a percent of the total
purchases within a sector varied by sector from 100% of
utilities to 10% of communications.
Percent of In-State Purchases By Sector

                                     Total
                       In-State    Purchases In-State Purchases
                      Purchases       (in        as Percent
   Economic Sector   (in millions) millions) of Total Purchases
 Utilities              $7.25       $7.25          100%
 Trade Contractors     $18.49       $19.42          95%
 Retail Goods          $11.08       $13.83          80%
 Governments            $1.25       $1.67           75%
 Natural Resources      $0.24       $0.34           69%
 Transportation         $1.80       $3.39           53%

 Services              $14.08       $28.29          50%
Wholesale Goods         $1.17       $4.75           25%
Financials/Real
Estate                  $2.04       $9.22           22%
 Manufacturing          $2.25       $16.94          13%
 Communications         $0.17       $1.73           10%
 Total Amounts         $59.83      $106.83         56%
      Factors Used to Examine Specific Industries

Purchase Location
·   Focus on out-of-state purchases

UVM’s costs and profitability:
·  Price
·  Quality
·  Time required to get product
·  Reliability of vendor
·  Availability of good or service within Vermont

Income Effects.
·     The higher the average wage in a given industry the more
likely we will be to recommend it for increased local purchasing.
  Factors Used to Examine Specific Industries, Cont.

Multiplier Effects
·    Employment and earnings impacts beyond initial firm UVM buys
from
Local Industrial Capacity
·    Adequate number of establishments and employment levels in
industry.
·    Industry importance in Vermont relative to US Economy, and growth
rate
Other Impacts
·    environmental impacts of different industrial purchases, price,
quality, delivery, and other vendor and product characteristics of
importance to UVM purchasing
·     local and state priorities (when present) for advancing specific
sectors.
    Business Alliance for Local
    Living Economies (BALLE)
An international alliance of more than 50
independently operated local business networks
with more than 15,000 members dedicated to
building local living economies.

They envision a sustainable global economy
made up of local living economies that build
long-term economic empowerment and
prosperity through local business ownership,
economic justice, cultural diversity and
environmental stewardship.