When local economies are dependent on only a few major sectors, they are vulnerable to changes in outside markets. When people do not meet their own needs locally, money immediately leaves a community. This stunts community development on all levels.
Jane Jacobs has proposed that the health of local economies be measured by the number of dollars of local economic activity they generate for every dollar of goods they import. diverse local economies are good at meeting local needs, and tend to add as much value as possible before exporting goods and services. They keep money circulating in the community, stimulating the economy and creating new economic niches. They pursue strategies of resource efficiency and use waste as resource. They are made up of mixed-use, economically diverse human-scale neighborhoods.
Local ownership tends to maintain local economic diversity because it builds on the loyalty between customers, owners, and their shared community. Community-based businesses offer connection to place through everyday transactions. Knowing the people that grow your food, press your clothes, fix your car, and sell you your computer provides a rich set of connections to place through everyday transactions. In Mondragon, Spain, a network of community cooperatives has operated for forty years, employing 21,000 people in hundreds of enterprises, with only three business failures in this period.
Self-reliant Local Economies with a strong degree of local ownership give communities a strong bargaining position. They can seek out stable, mutually-beneficial trade partnerships, insisting on fair trade for their goods and services. Strongly differentiated bioregional economies enrich the possibilities for cultural exchange and cross-fertilization. Trade is enhanced when local areas produce high value-added specialties which reflect their local skills, traditions, and landscapes — rather than simply exporting standard commodities at poor prices.
Agricultural diversity is particularly critical in order for a local region to retain its own options for development and self-reliance. Diversity of seeds and crops, uniquely suited to local soils and climate, ensure a diversity of local foods. Someone else's seeds imply someone else's needs. Monocultures of any kind are vulnerable to factors external to region.
Import replacement activities in which local manufacturers are linked to local suppliers save transport costs, delivery time, communications costs, inventory costs, and warehouse needs. Transactions like these that protect a community's financial, social, and ecological assets decrease the need to import products.
Local economies also benefit from local currencies and trading systems. Local currencies, by design, may only be earned and spent within a well-defined town or region. They are typically denominated in time (e.g. hour bills, half-hour bills, quarter-hour bills), with a well-defined equivalence value in U.S. dollars (e.g. one hour equals ten dollars). Transactions in local currencies are subject to the same laws and taxes that would apply for normal transactions, with hours simply accounted by their equivalence value.
Local currencies, by counting an hour's work for an hour's work, promote equity, making a wide range of goods and services available to all participants in the system. The Time Dollars system, which has many local chapters, has even achieved tax-exempt status by restricting itself to transactions which serve the common good.
Another approach is to create a Local Economic Trading System (LETS), which is typically denominated in local or "green" dollars. In this instance, transactions are cleared through a centralized accounting system, which replaces the need for a physical currency. Other LETS systems use special checking accounts or electronic cards to facilitate transactions.
All systems work by creating a directory of goods and services. Listings for both individuals and businesses range widely, from barn repair to botanical surveys, and from pizza to piano lessons. Experience shows that a system becomes most valuable when it reaches 200 active listings. Directories are often printed as a newsletter, but may also be web-based or made available in a binder in selected locations.
Local currencies and trading systems serve many valuable functions. By definition, they keep economic activity cycling within a well-defined community, helping to diversify and stabilize Local Economies. They may be used to generate credit when conventional credit is scarce. They encourage people to offer and develop a range of underutilized skills and services. Finally, as the Ithaca Hours state, they "are backed by real capital: our skills, our time, our tools, forests, fields and rivers."
Increase the diversity of local economies and the degree of local ownership. Meet local needs locally, and use the resulting stability and security to export only high value-added products at the most favorable terms. Promote local trading networks and currencies.
Examples of this pattern in action:
The Wealth of Nature
"Environmental quality, not mining, logging, or ranching, is driving local economic development in the West." states Thomas Michael Power in the Featured article for Spring 1996's Issues in Science and Technology magazine.
Plug up the leaks
"Plug up the leaks" is a formula that can help solve many of our energy, water, economic, and even security problems An Interview with Hunter S. Lovins, by Robert Gilman One of the articles in Sustainability (IC#25) Late Spring 1990, Page 20 Copyright (c)1990, 1997 by Context Institute | To order this issue … One of the brightest lights in the sustainability movement continues to be Rocky Mountain Institute, a remarkable think-tank nestled in the heart of Colorado. Hunter and Amory Lovins founded RMI in 1982 to explore opportunities for increased efficiency in our technologies, economies, and energy systems. While their work is gaining more recognition of late — Amory flies around the world consulting with governments and utilities — there is clearly still a lot more we can do to consume a lot less of almost everything, as Hunter describes below. Contact RMI at 1739 Snowmass Creek Rd., Old Snowmass, CO 81654-9199.
Organizations whose work incorporate this pattern:
Copeland, Grant. Acts of Balance: Profits, People, and Place. New Society Publishers. Gabriola Island, BC. 1999.
Power, Thomas Michael. Lost Landscapes and Failed Economies: The Search for a Value of Place. Island Press. Washington, DC. 1996.
Rasker, Ray. A New Home on the Range: Economic Realities in the Columbia River Basin. The Wilderness Society. Washington, DC. 1995.