Shopping was once very different from how we experience it today. Main streets would be lined with small shops, including the baker, greengrocer, fishmonger, butcher and ironmonger. In many places, the only businesses owned by outsiders were the post office and the railway station. Making the week’s purchases took longer and there was usually time to chat to the person behind the counter.
Far removed from this is the modern retail model, in which car-centred development has led to anonymous shopping centres dominated by large chains, with a huge range of items available under one roof. Meanwhile, the online sector continues to grow, as more Internet-savvy shoppers find bargains in cyberspace.
To differing extents, locally owned businesses still persist in many parts of the world but their survival is not assured without ongoing support. As money circulates around a system, it could be compared to blood moving around the body: a normal quota of blood will keep the organism healthy but if the life-force leaks away, it will probably become sick and weak.
Everything under one roof
The New Economics Foundation is a cutting-edge British think-tank that has been looking into how local economies can be nurtured. It has created a simplified model involving three different types of town:
- “Home Towns”, which have main streets where a large proportion of shops are locally owned.
- “Ghost Towns”, or places where there are virtually no shops and people travel elsewhere to do their shopping. Examples in Australia and New Zealand would include certain sprawling outer suburbs.
- “Clone Towns”, which are particularly evident in the UK but, fortunately, not in Australia and New Zealand. The main street is lined with large multiple chains and high rents have driven independent retailers to the side streets or more downmarket suburbs. Much of the local distinctiveness has disappeared.
In many parts of the US, the typical shopping streets found in most of Australia and New Zealand are such a rarity that in many cases they have become tourist attractions. In their place is concrete box development largely populated by chain stores, or strip retail development lining highways. In addition to lacking the human scale found in walkable shopping streets, the aesthetics are uninspiring at best.
Under the surface, high rates of local ownership can generally be seen as a barometer of community health, an association that has been identified in America. Towns with a high percentage of locally owned stores tend to have a lower crime rate, higher rates of volunteering, greater wellbeing and a stronger social glue. All these yardsticks have been observed to go backwards once a large chain has opened in the area and the primary cause is probably the loss of small businesses that play a key role in nurturing community life.
From a local-economic perspective, the major drawback with chains is that much of the money spent in them disappears from the local area, in some cases to overseas owners. In contrast, locally owned stores are more likely to support locally owned businesses for services such as printing and advertising.
While no figures appear to exist for Australia and New Zealand, an American advocacy group called the Institute for Local Self-Reliance (ILSR) found from a study in Maine that for every dollar received by a locally owned business, 45c is spent in the locality, compared to 14c at a “big box” chain; this suggests a scenario where locally owned businesses are generating three times as much secondary economic benefit within the local area.
The American retail chain Walmart, the world’s largest company, has been accused in Mexico, Germany and Wisconsin of selling goods at a low cost, often with a view to driving out smaller competitors. Such practices are known as predatory pricing and in these cases it’s common for a chain to raise prices significantly when it has become a local monopoly.
As a reaction against chains and big box development in the US, the ILSR runs its New Rules Project to monitor the health of local economies and identify emerging trends. Recent encouraging research tends to indicate that the pendulum is currently swinging back towards local ownership, which is becoming increasingly trendy.
Some US cities have seen the Starbucks chain go as far as to open coffee shops that lack the company name and are instead branded as independent cafes with night-time hours, beer and wine, live music and poetry reading. This is an example of how supporters of local economies need to be increasingly well-informed if they do not want to be misled.
Supermarket domination
In a familiar pattern that has been replayed over much of the world, once supermarkets have opened their doors, smaller competitors are often forced to close because these minor players are unable to compete on price. Despite the public relations announcements concerning the creation of new jobs, unfortunately supermarkets usually destroy more jobs than they create, with the loss of independent retailers leaving a town blander and more homogenous. Some Home Towns have fought against proposed supermarket developments, with varying degrees of success.
Australia has the most concentrated supermarket sector in the world, with two players, Woolworths and Coles (owned by Wesfarmers), controlling about 80 per cent of the market share between them. Other smaller players include Aldi, IGA and Spar. “Monopsony” is a term for a domination of the marketplace that falls short of a monopoly but one where one player has undue influence. Reports abound in the media of the Big Two dictating prices to their suppliers that make it hard for these growers to keep afloat, and with two dominant players, Australia arguably has what is known as a duopsony.
In New Zealand, the greater number of supermarket choices is misleading, with the sector dominated by just two companies. These are Progressive Enterprises, owned by Woolworths (whose chains include Countdown, Woolworths, SuperValue and Foodtown) and Foodstuffs (Four Square, New World and Pak‘n Save).
Australia’s supermarket price war
The potentially damaging effects of supermarket power have been further highlighted by a “price war” in Australia between Coles and Woolworths that began in late January 2011. This started when Coles reduced the price of its own-brand milk by one-third in an aggressive bid to use everyday staples as a means of capturing market share and increasing its size to catch up with its larger competitor. This has been followed by free-range eggs, butter, fresh chickens, olive oil and toilet paper, and in each case Woolworths has been obliged to follow suit. This led to a Senate enquiry that started in March.
Frank Zumbo, a business law professor from the University of New South Wales, believes this discounting strategy is an attempt to drive smaller retailers out of business and this concern is echoed by the consumer group, Choice. A supermarket’s prices are partly determined by the level of local competition and, if this dries up, prices are certain to rise. While discount prices are a boon for consumers in the short term, further ahead, shoppers may find themselves paying significantly more.
Among those at the sharp end of the price war are Australia’s dairy farmers, with every cent per litre price drop at the farm gate representing thousands of dollars of lost annual income. In the US, large feedlot dairies dominate the industry and an Australian dairy sector where farmers graze cows in fields may be under threat if dairies are forced to scale up to remain in the game.
Local food for a local economy
Few people are so financially squeezed that they are always obliged to buy food from the cheapest outlet and in many cases the locally grown option costs less, anyway. Buying local works at a holistic level by generating prosperity, boosting jobs, benefiting the environment via minimal transportation, and encouraging a greater level of regional food security. The more globalised a food system becomes, the longer its supply chains and the risk of future supply disruptions increases.
A good option is to shop at one of the many farmers’ markets running in Australia and New Zealand. While only about 5–20 per cent of the supermarket selling price goes to the grower, at a farmers’ market this rises to about 40–80 per cent, making a small acreage far more likely to provide a living. The food is fresher, it is in season, you get to meet the grower and, if not certified organic, it is less likely to have been sprayed with chemicals. The NEF carried out an analysis comparing a London street market to a nearby supermarket, and found that, in addition to the produce at the market being half the price, it generated twice as many jobs per square metre of retail space.
Other possibilities are to buy from roadside stalls or to subscribe to a community-supported agriculture scheme. This links up one or more farmers from the surrounding area with consumers, who are supplied a weekly box of local produce that is usually home-delivered. Compared with a farmers’ market, there is less flexibility and choice, and a box is probably more suited to a family than a single person, who may have difficulty eating it all before the following week.
To nurture local food production, it’s also necessary to ensure that regulation of small-scale growers and artisan producers is not excessively onerous and allows them to continue their activities. Excessive paperwork and over-zealous hygiene standards that require the most expensive equipment on the market are ideally suited to the multinationals but when applied equally to the smallest producers this creates a highly uneven playing field. Such issues are constantly on the radar of the Slow Food movement.
As for supermarket shoppers, they have the choice to steer away from items that are part of a price-war discount, which may itself require some research. Otherwise, they can turn the tables by demanding to be charged a price for produce that reflects a reasonable income for the grower.
Swimming against the tide
If they looked, most shoppers would likely find that many of their purchases were manufactured in China, a country that has positioned itself as the world’s factory, with an accompanying environmental nightmare. Among retailers, chains tend to be more likely to sell Chinese-made goods; in the case of Walmart, this applies to more than 70 per cent of the items in stock.
Supported by both low wages and lax working conditions, China is able to offer discount prices, sometimes making it hard or even virtually impossible for an equivalent Australian- or New Zealand-made item to compete in the marketplace. In meeting this challenge, local products often tend to target a more environmentally aware consumer. Buying local can also be a way of better integrating into the community rather than feeling as though you are situated somewhere on the fringe. Other producers aim towards the tourist market, making the most of their handmade origins and sometimes pitching themselves as unique or quirky.
With the arrival of the modern market economy, most families who in peasant cultures would have been immersed in a world of production have lost connection with the importance of this concept. Instead, it is just too convenient for most of us to buy what we want elsewhere. As a response to this, the Transition Town movement is looking at “reskilling” as a means of reclaiming this knowledge and disseminating it before it is lost.
At a more institutional level, Buy Local campaigns are common among chambers of commerce and local governments. Some councils, including Dubbo (New South Wales) and Cedar Rapids (Iowa) have local-preferred purchasing policies, which can be more powerful than behaviour campaigns in that they transcend voluntary action.
However, sometimes these policies have been challenged on the basis that they increase the scope for corruption. In the eyes of some more hardline free-market advocates they are anti-competitive and if the neo-liberal Multilateral Agreement on Investment had been passed in 1998, as planned, local purchasing policies would have been banned across the OECD nations.
The role of alternative currencies
Across the world, increasing numbers of places are launching their own currencies as a further avenue for localising money and strengthening their own local identities. This is usually legal so long as the local currency does not resemble its national counterpart. In some cases, spenders of local notes are eligible for special discounts.
These complementary currencies have circulated in various eras, with the first modern example appearing in 1991 in Ithaca, a small city in upstate New York. The Ithaca HOUR was launched by local activist Paul Glover, who was unhappy with the flow of money out of the city to later be used for purposes such as fighting wars. Today, there are about 300 participating businesses.
Following the appearance of the Transition Network, a few British towns and one Inner London suburb have been busy designing their own unique currencies. This began with the Totnes Pound in 2007 and was followed by Stroud, Lewes and Brixton. In these cases, the rationale behind a stronger local economy is a greater sense of community resilience.
To maximise the economic benefits of a local currency, it needs to circulate as quickly as possible. Prien am Chiemsee is a small town in Bavaria that in 2006 launched the Chiemgauer. This note travels from hand to hand faster than the Euro due to an interesting principle known as demurrage that was resurrected in the early 20th century by maverick economist Silvio Gesell.
Chiemgauer notes attract a fee of 2 per cent every three months, with the result that they slowly and steadily depreciate in value. As a result, holders of the currency spend it as a first preference to minimise their demurrage charges. Most of the world’s local currency systems are intended solely as a means of exchange and purposely lack the investment advantages of national notes. The Chiemgauer takes this one step further and has created an active disincentive against hoarding.
Nowhere in Australia or New Zealand currently appears to have its own currency note system other than a few places where these are tied to a Local Exchange Trading System (LETS) with a limited participation, particularly by the business community. A couple of years ago, the Queensland town of Maleny, famous for its high concentration of co-operatives, announced plans to unveil a local currency but nothing has so far eventuated.
While note-based local currency systems are stirring more interest among businesses than most other complementary currencies, it remains to be seen how close they have come to achieving in their goals.
Martin Oliver is a writer and researcher based in Lismore, northern NSW.
