This section contains excerpts from the book Relocalization in Rural British Columbia: A Guide for Communities Before the Long Emergency, currently in writing.

Local Economics Defined

Local economics is at the other end of the spectrum from global economics. Local economics operates according to the same principles and so-called rational market forces that guide free market capitalism. The difference is that “place” becomes an important consideration in rational economic decision making.

With globalisation, place has lost its place in corporate decision making. Very few corporations are tied to place. In a global economy capital can move anywhere . . . that labour is cheaper, labour laws are overlooked and the cost of doing business is lower.

Concerns for “local” economies exist everywhere.

Do you remember the chiding pleas of American news anchormen, begging American corporations to stay at home? Do you remember the black lists of traitorous corporations read each night on prime time news? That’s a cry for local economics at the meta-level.

In this section we introduce local economics: economic theory and practice directed toward smaller scale economies of supply and demand. Local economics takes on new meaning in an era of “run away” globalism. It is the economics of self-reliance. Local economics involves such simple things as shopping at home, and such complicated things as public corporations.

At Rural Futures, we believe that the principles and practices of local economics work well in rural BC and should be considered by economic development departments and commissions.

Local Economics: A Bit of theory Thrown At Ya

Western, and now global, economics is built on theories that go back to the granddaddy of capitalism, Adam Smith (18th century). Capitalism’s theory is that if you leave market forces up to the free exercise of countless entrepreneurial agents, then laws of profit maximization will be optimized and the greatest amount of wealth will be generated.

There are a number of assumptions and oversights in this simple theory.

There is an assumption that people are rational economic agents. The “invisible hand,” as Adams called it, guides free enterprise to optimal wealth creation because the “market” is rational . . . and to some extent altruistic.

There is an oversight, a failure to recognize that materials and ecological services are finite.

Another oversight has to do with failure of equitable wealth distribution and the susceptibility of the invisible hand to be coerced . . . by power.

There has developed a principle that wealth and growth are unquestionable goods, inevitable, continuous outcomes of free market economies. The bigger the better.

We are all familiar with the impacts of a global economy. Globally, it has been good for many countries. More regionally, locally, or within industries and for workers, it has been bad, sometimes.

Local economists do not disagree with the basic principles of free market economics. They argue that those principles can be steered to make local economies stronger and more resilient. And, they argue that subordinating all aspects of human life, including our membership in the environment, to profit and efficiency maximization is harmful to individuals and to communities. Sometimes it is best to do with a little less wealth, in favour of improving other aspects of life. They argue that wealth generation has a community level responsibility.

Where do most of the profits go? Do they go back to the communities and regions that produce the goods and bear the social and environmental costs of production, or to distant shareholders? Are profits reinvested in local enterprise and community infrastructure? Is there any commitment by corporations to the communities that supply their needs? Or do they leave town as soon as lower labour costs or lower environmental standards are found elsewhere?

In British Columbia, the most familiar example of enterprise based on local economics is the community forest. In varying degrees, community forests utilize a land base with community benefits as part of the business plan. A local resource, trees, is utilized by a community-owned corporation that directs part of profits to community needs: a community centre, improved services infrastructure, a skills centre. Local employment is created. If the wood is used for local production, secondary jobs are created. If the products are consumed locally, then import substitution occurs. The land base (in area tenures primarily) may be managed for other uses and values, such as conserving sensitive ecological areas or for providing outdoor recreation.

The mobility of capital is the mantra of the classical economic catechism. It is easy to see the implications for local, regional and even national economies. The last decade of globalizing economics has seen capital move from highly paid to lowly paid labour markets, from places with (relatively) firm environmental regulation to places indifferent to environmental protection and away from the markets that ultimately purchase the production to markets that produce a lot and consume little.

Economist Michael H. Shuman (Institute for Economics and Entrepreneurship) and Mark Roseland (Centre for Sustainable Community Development, Simon Fraser University) argue that local economies can be constructed on principles of self-reliance. Self-reliant communities are less vulnerable to the vagrancies of mobile capital. Localized economies promote stability, diversity and investment in community. They stimulate owned wealth. Within practicable limits, the “law” of profit maximization is placed alongside other community economic objectives, and social, cultural and environmental values.

Local Economics: A Strategy

Three strategies are enough to define an economy that is oriented to self-reliance

Local economics does not mean isolation from larger economies. Schematically, in the terms of Mark Roseland, it means it means putting local financial capital at the service of the other forms of capital that sustain communities: human, social, economic, cultural, and environmental and built. These six forms of capital – working together – sustain communities.

Local economics operates in a global context. Conscious development of a local economy means only that Adam Smith’s “invisible hand” is steered in the interests of community stability and sustainability.

Local Economics and Energy Descent

Even shallow energy descent will alter the flow of goods and services. Industries that have high transportation costs for materials or for shipping to markets will benefit from shortening transport distances. It will be too expensive to import essential and non-essential goods from around the world. The business case for producing goods for regional markets will improve.

Two stark examples for many rural BC communities are the forest and agriculture industries. We continue to marvel at logging trucks passing each other going different directions as wood from one area is transported hundreds of kilometres . . . and vice versa. Rising transportation costs will mean that directing wood to the closest mills is increasingly attractive. The cost of industrial farm production and shipping of food will mean that local food products will replace imports.

Deep energy descent and relocalization economies are described elsewhere on this site. In the deep energy scenario, supply becomes the critical economic and social issue. Regional communities will need to depend much more than they do now on all forms of local capital.

To the Top