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Shopping bags are bursting at the seams this holiday season, but gifts that keep on giving are hard to find, and now we have part of the explanation. Just in time to tempt our humbug impulses comes a study providing definitive new evidence that the invisible hand that helps a market economy perform its miracles is weighed down by chains – chain stores, to be exact.
This study and others like it are hot these days across the U.S., where formula franchises and box stores are getting dissed by both mom-and-pop independents and economic planners. But few such campaigns exist in Canada. Pity. The evidence in this report, on a funky shopping area in Chicago called Andersonville, tells us a lot about the kind of independence-day consumer tactics and policy changes we need to prime the pump of our own economy.
The report, issued by Civic Economics, an Austin/Chicago-based planning consultancy, even offers clues on what’s at stake in the debate about protecting the greenbelt around the greater Toronto area, the farmland, sprawl land and mall land that’s won Toronto its reputation as “Vienna surrounded by Phoenix.”
The Libs have made the boldest moves of any government in the province’s history to preserve this farmland – the best in the country, and key to the province’s food security – from further suburbanization.
Yet neither the Liberals nor conservationists who back the greenbelt have named the economic imperative that goes with greenbelt protection. This runs counter to the advice of revered conservationist Wendell Berry, who believes that the commonwealth of air, water, forests and soil can be protected on only “one condition: vigorous local economies.” Developing these, he argues in Another Turn Of The Crank, “ought to be the primary aim of our conservation effort.”
Sprawl and mall economics are about handing over newly vacant farmland to developers so they can accrue the same power as old-style owners of one-industry towns to eliminate anyone who might compete for authority, standards or resource use.
In this scenario there are no main streets open to any variety of shopkeeper or even to any unique and out-of-the-box-store thinking, just namebland nowheresville formula stores. And the price of this tectonic retail and social shift, the U.S. study shows, is the disappearance of the entire range of what economists call the “indirect” and “multiplier” effects of shopping that used to supply economies a huge portion of their bounce.
In Canada, the stats on U.S.-owed chains show the challenge. According to Ryerson’s Centre for the Study of Commercial Activity, 31 per cent of the top retail corporations here are U.S.-owned and generate 20 per cent of total retail sales (excluding auto). Of the top 10 mega-chains in Canada, five are American – and you know them: Wal-Mart, Costco, Sears, Safeway and Shopper’s Drug Mart.
The weakest link in these chains is at the local level, where significantly fewer well-paid workers are hired than in home-grown enterprises, considerably fewer local goods and services are bought, and dramatically fewer idiosyncratic arts and charitable donations are made to communities.
When these mechanisms are understood, it’s no longer a mystery that the poor, working poor and struggling middle classes all lost economic ground over the past 30 years, the years when retail chains became the norm, apart from the downtown cores of a handful of cities.
Civic Economics first won national notoriety as a dragon slayer late in 2002. Back then it rattled the chain of bookseller Borders, which cancelled a move to Austin, Texas, following a campaign to “keep Austin weird.” A report from Civ Ecs showed that local book and record stores pumped 45 cents of every shopper’s dollar back into the local community, while Borders only returned 13 cents.
Late this fall, Civ Ecs struck again with a study of the chain reactions in Chicago of 10 local firms and their global counterparts. “For every $100 in consumer spending with chains, $43 will remain in the local economy,” the report says, but “if that same spending occurs in a locally owned firm, the value jumps by 70 per cent, to $73.”
Local firms squeeze so much more community value out of a dollar because they pay slightly higher wages and spend a lot more on local suppliers, bookkeepers, media ads and other services that the chains handle at head offices far away.
The indirect impact of home-based retailing is also greater because of the extra “backward linkages.” Those bookkeepers, farmers and manufacturers who score contracts with local retailers have to buy their own supplies locally. Then comes the ripple effect because all those bookkeepers, farmers and manufacturers go out and spend their money – a multiplier.
Among the beneficiaries, Civ Ecs senior partner Dan Houston tells NOW, are governments, which get an extra 15 cents in taxes every time a dollar goes around. “If that dollar leaves Toronto and turns up in, say, Bentonville, Arkansas, then Toronto, Ontario and Canada get nothing more than the first few cents,” Houston says.
“Put your money where your house is” is how U.S. members of the Independent Business Alliance put it.
When it comes to Ontario’s proposed greenbelt, the place to look for multipliers is the food sector, partly because these are the most fertile lands in all Canada, partly because Ontario has a $4 billion trade deficit (draining job-creating power out of the province) in food, much of it easily grown in the fertile crescent of the greenbelt. Food is a crucial multiplier because food processing is the biggest industry in the GTA, employing 45,000 workers in need of an agricultural hinterland.
Do the math. An economy based on Ontario’s proposed greenbelt and on the fostering of local retailing makes for a wealth-generating brand of power shoppers. They have nothing to lose but their chains.
news@nowtoronto.com
