Investing locally

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There are two reasons Americans increasingly wish to invest in locally owned businesses. First, they understand that these businesses are the real pillars of a prosperous, sustainable economy. A growing body of evidence suggests that every dollar spent at a locally owned business generates two to four times more economic benefit—measured in income, wealth, jobs, and tax revenue—than a dollar spent at a globally owned business. That’s because locally owned businesses spend more of their money locally and thereby pump up the so-called economic multiplier. Other studies suggest that local businesses are critical for tourism, walkable communities, entrepreneurship, social equality, civil society, charitable giving, revitalized downtowns, and even political participation.

State and Local Investments play a critical role in building community wealth for several key reasons:

  • They provide needed capital to local businesses, which helps create and preserve local jobs and ensures healthier, local economies.
  • Local business success generates increased tax revenues for localities, which can be used to support important community needs and amenities.
  • Since local businesses are likely to rely on local suppliers and service providers,such investments also have a positive economic multiplier effect that helps ensure that local dollars will remain and recirculate within the community.
  • Investing a portion of pension fund investments in area businesses helps local enterprises succeed, and thus, also generates greater tax revenues that can be used to enhance infrastructure and services.

every dollar spent at a locally owned business generates two-to-four times the economic development impacts of a dollar spent on an equivalent non-local business.

Local means closer proximity between producers and consumers, which fosters relationships of trust between consumers and farmers, maximizes the level of economic activity within a community, and minimizes the carbon footprint of shipping.

Local also refers to control. Local control of a business means the proprietor is more likely to re-spend the dollars earned locally, which increases what economists call the “multiplier effect,” while being less likely to relocate to another region. Local businesses also nurture local culture and the presence of diversified local businesses tends to strengthen indicators of community well being, like political participation (see “the benefits of locally owned businesses“).


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