Modern consumers are confronted with a dizzying array of product colors, sizes, styles, textures, tastes and nutritional content to choose from. Increasingly, individuals are being asked to consider decisions that extend beyond the boundaries of a product’s physical characteristics. Were your jeans made in a sweatshop? Was your cell-phone assembled in a country that harbors terrorists? How much carbon dioxide will your vacation travels generate?
An era of increasing energy prices and heightened concern about the environment and international conflict has ushered in these modern manifestations of an ages-old social concern: should you buy local? A multitude of communities have developed sustainable business networks; community supported agriculture subscriptions have exploded; publicly supported institutions are increasingly required to purchase locally sourced food and other products. Consumers are now confronted with choices such as whether they should buy snow shovels from their local hardware store versus from a “big-box” retailer or whether they should purchase food grown only within a specified distance from their home. Are “buy local” purveyors peddling sophistry or should concerned consumers pay heed to their messages?
The Siren Song
Buying local evokes appealing Rockwellian images. There is something wholesome about patronizing Al’s Hardware for that lawn mower instead of Lowe’s, or the MacDonald Farm for that broccoli instead of Walmart. Entreaties by advocates of the buy local movement (“localists”) contain three major themes which leverage these feelings. First, buying local “keeps money in the community.” You might spend a little more, or have a smaller selection, but the money you spend is less likely to “escape” to some faceless out of state corporate headquarters. Second, buying local is environmentally responsible. Shipping products around the globe uses up “too much energy,” produces carbon dioxide emissions and generates wasteful packaging. Third, local products are safer products. How can we be sure that asparagus from 3,000 miles away is non-toxic, or that toys produced in China are not lethal?
It is not clear what the notion of a local product is, however. Consider a recent production of Verdi’s Don Carlo here in the Berkshires at Tanglewood. Is Don Carlo “Made in the Berkshires?” Like every other product or service, Don Carlo was made by the world economy; it is impossible to make just about anything in one country, much less in one county. The performance may have taken place here, but in what real sense was it made here? Where were all of the performers trained? Where did the orchestra’s instruments come from? Where were the materials to make the instruments mined from? And wasn’t Verdi himself from Italy? Saying that Don Carlo was made in the Berkshires eschews any appreciation for just how much our lives depend upon global commerce and industry.
When we are asked to buy local or to consider living a simpler life, it is in the context of being able to freely borrow some of the conveniences of modern society. Backpacking through New Hampshire’s White Mountains is more enjoyable to me because my modern equipment makes the trek comfortable, but also because I get to return to the modern luxuries of running water, indoor toilets, and pain-reducing medicine.
Shunning the elaborate interconnected global economy would require a massive commitment of time and resources to produce even the most basic items, and therefore requires that consumers have less of everything. Reflecting upon life in modern Amish communities or among homesteaders in the 19th century American west merely scratches the surface of the hardships endured by those who shun outsiders. If buying local is the source of community prosperity, why should localists stop at the community level? Why shouldn’t residents of the Southeast section of Pittsfield shop only in the Southeast side of Pittsfield? Or the residents of Kenilworth Street only with each other? And just think of how wealthy the residents of 31 Kenilworth Street would be if their desires for food, cars, clothes, chairs, medicine, etc. never escaped their home.
Community building, environmental responsibility, and product safety are important. Localist rhetoric of competitive losses, community decay, and externalities focus consumers on the small, visible costs imposed by global commerce. But this red-herring disregards the tremendous benefits gained from participating in a large, integrated, global economy. The seductive song of localists ultimately lures individuals over the shoals of self-sufficiency, which can only result in poverty.
Lessons from a Pin Factory
This key insight was best illustrated over 230 years ago by Adam Smith. He observed that workers in a pin factory were able to produce far more pins when they divided the work than when they built pins entirely themselves. His recognition that specialization was the original source of economic growth continues to be true.
What is true for workers in a pin factory is true for workers in any city, state or country. The purpose of the division of labor is to make a smaller quantity of labor produce a greater quantity of output. Since more is able to be produced, each individual can now exchange the fruits of her labor for more of the other goods and services that she desires. Wealth expands rapidly as this specialization and division of labor deepens.
Some view this specialization as cruel and in their utopian world individuals would freely engage in different tasks. Ironically, the intensification of the division of labor has permitted us to do just that. As recently as a century ago, people worked 15-hour days from childhood to the grave just to put food on the table and clothes on their backs. The typical person today works 40-hour weeks from her twenties to sixties even as food and clothes are delivered right to her doorstep. The only way to deliver more leisure and work flexibility is to find a way to provide the goods and services we desire in less time.
Applying the Lesson
Evaluating each of the major themes of the localist movement requires an appreciation of Smith’s insight. When you spend $50 more for your lawnmower from Al’s hardware, does keeping that money in the community benefit the community? Al is certainly better off in the immediate-term. But what about the local charity you might have donated that $50 to? Or the electrician that would have come to repair your outlet? Those victims remain unseen. The bigger point is that asking all of the residents of your community to buy local is asking you and your neighbors to make everything by and for yourselves. You will have to make your own lawn-mowers, newspapers, milk, machines, textbooks, etc. and sell them only in your community.
Small scale production is more costly because it forgoes the gains to be had from producing for large markets. Many products cannot be profitably produced without the possibility of sales to millions of consumers. A substantial portion of economic growth during the previous century has been due to capturing gains by producing for large markets, especially due to technological advances in agriculture and manufacturing. By pledging to buy from your neighbors, you are pledging to produce goods and services in incredibly costly ways, and may not even be able to produce them at all. The entire community will enjoy fewer goods and services, particularly those with fewer skills. It is a fallacy to focus on green pieces of paper as a measure of a community’s well being rather than its command over resources.
What about the environmental consequences of shipping goods around the globe? Fuel and transportation costs make up a miniscule portion of non-local product costs, particularly for food. Embedded in food prices are costs for fertilizer, pesticide, farm labor, transportation, warehousing, refrigeration, land quality and more. In other words, what is gained by taking advantage of economies of scale (larger farms) and optimizing location (growing wheat in Kansas instead of Massachusetts) far outweighs the cost and pollution from trucking wheat from Kansas to Massachusetts, particularly as per-unit pollution and transportation costs continue to fall. Rather than people in local communities growing their own wheat in whatever prevailing soil and weather conditions exist there, strangers in Kansas grow enormous quantities of wheat for millions of us. The natural advantages of growing wheat in Kansas are made stronger every year by the investments in knowledge and technology made by those who have chosen to specialize.
Many places in the country can grow wheat. But by not doing so in the place where it is economically efficient would dramatically increase the amount of land under tillage and consume far more resources to produce the same amount of wheat as before. Rejection of large-scale farming for a local model merely conflates the dispersion of environmental damage with less damage. It would be akin to a rejection of a city bus system because each bus belches more emissions than a typical car.
The environmental concerns of localists also overlook the fact that eating local can consume fuels too. If you harvest berries in the summer and freeze them for the remainder of the year, is it clear that this is cleaner than having fresh berries shipped in from time to time? It may still be so, but these arguments consistently ignore the benefits of engaging in a global commercial economy. By specializing the growing of wheat in Kansas, more food is available to more people at lower prices than if wheat were grown locally. And these low prices reflect that fewer resources were required to do this. A focus on minimizing costs alone would seem to suggest not growing any food; unless one acknowledges that there is a benefit to eating.
The third major theme of localist arguments concerns the safety and reliability of products sold by distant strangers. In a market economy, competition is the ultimate protector of workers and consumers. Just as wages are bid up by entrepreneurs competing for talent, product prices are bid down, and quality up, by firms competing for business. To buy local requires a substantial reduction in the number of businesses competing for your labor services as well as for your purchasing dollars – it reduces competition. Company stores and company towns do not evoke pleasant images for most people.
In his seminal book, Knowledge and Decisions, economist Thomas Sowell discusses the advantages of the division of labor from an informational perspective. He demonstrates that science and technology lead to far more complexity in producing various goods today, but that growing complexity among a handful of specialists permits far more simplicity (and ignorance) in the actual use of modern goods by masses of people. Few of us know how to build a car, or calculator, but operating each is simple. Nonetheless, we can weigh the relative merits of commercial products whose individual mechanisms are wholly unknown to us by tapping into the vast networks of private and public information that are in short supply locally. In this regard, eschewing distant products because of informational concerns is little different than forgoing the use of calculators and cars because you do not understand how to build them.
Buy What You Want, Where You Want
All of this is not to say consumers should not buy locally if it fits their habits. Seasonal local fruits and vegetables are tastier. And locally crafted products seem to be of higher quality. What we are conveying is that whatever risks global production poses for humanity pales in comparison to the ensuing poverty from any serious attempt to reject a commercial society.
This is not a hypothetical assertion, but one warranted by powerful facts. Recollection of the nasty, brutish and short existence of pre-industrial humans that lived and produced locally is one fact. Another is that in modern society, a large body of evidence demonstrates that nations who embrace open trade and exchange institutions prosper while closed, insular nations do not.
The work of economist Anne Krueger demonstrates that on average free-trading poor nations have higher economic growth rates than the protectionist ones. Using data from the 2007 Economic Freedom of the World study, I have found that statistically controlling for other factors, countries at the average as compared to the bottom of the free trade index (roughly 30 points on a 100 point scale) enjoy over $1,500 higher per capita living standards. For perspective, the average per capita living standard in sub-Saharan Africa is $2,000.
Consumption and production are intimately related. Absent a large and diverse market to sell products to, and a large and diverse pool of entrepreneurs and workers to specialize, little can be produced, and hence consumed. Despite the best intentions of the localists, their proscriptions amount to little more than sophistry and would relegate citizens to lives of severe poverty.