Tuesday, 26 December 2017

Money Works Like Blood - Why Buying Local Matters

Money works like blood, it needs to circulate around the local economy if it is going to keep the local economy alive, if it leaves then the local economy bleeds.

The velocity of money is the number of times money changes hand in an economy, it's both a complicated and very easy to understand concept and can apply in a village or a country. The velocity of money is crucial because the Gross National Product (GNP) is equal to the money supply multiplied by velocity of money or the amount of money multiplied by the amount of times money changes hands in the local or provincial or national economy.

In a local economy if the money is not circulating fairly rapidly you move toward a recession or a failing local economy (the supply of money stays the same unless you are the US Federal Reserve and can print money from nothing!). When money circulates more quickly with money passing through more hands, more people have the benefit of the money.

I run a small beef farm (Starrs Point Steers), revenues are OK but expenses are high, however virtually all of my expenses or expenditure are spent locally, whether it is an agricultural supply store, veterinarian, mechanics or local labour all of this money stays in the community and the associated taxes are paid to the province. I use the example of a beef farm but you can substitute any locally sourced product, local retail or service. Spend your money with other locals or citizens of your province and they in turn should spend their money with you and help provincial taxes.

Buy beef (substitute any other local goods or service) from a local producer then that money is circulated from the local business to employees who in turn will purchase locally etc. etc. Buy steak from Alberta or much worse non-Canadian and you support their labour, services, profits and taxes, money that leaves our area, never to return.

If we as a community could retain more of our own money within our community and province we have a chance to remain or become a vibrant community, better able to retain our people and services.

Analyse where your money is going. Keep it local and it will come back to reward you in unforeseen ways. Price may be slightly lower for products from elsewhere (for multiple reasons e.g. factory farming, low wages etc.) but with price as the sole determinant we end up poorer in terms of health and indirectly through personal finances and economic health of the community. For community viability it is not how much the community has but how much the community can keep it circulating without letting it leak out.

David Acton
Starrs Point Steers
Starrs Point
Nova Scotia