Like the snail, local economy sweats its shell; yet, how durable is it?

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A snail perspires its shell into existence. (Image Answers.com)

I enjoy Jean Henri Fabre’s book, Storybook of Science, which brings my son, 10, and me to the world of the beehive this week in lessons. We sit entranced in the front room as this French naturalist, who died in 1915, tells of the working bees. We meet languorous drones who’ve impregnated the queen and are ready to be slain and swept out the front door. We enter the toils of wax worker bees.

Fabre, whose Uncle Paul character describes creation’s wonders to a young niece and nephews, says bees create wax from their stomachs. “There, little by little, the waxy matter oozes out, just as with us sweat oozes through the skin. This matter accumulates,” Uncle Paul tells the spellbound children, “in a thin layer which the insect detaches by rubbing the stomach with its legs.”

How the bees build their combs he saves for another chat, but Uncle Paul ends my readaloud by reminding the attentive children of another creature. “The snail *** has already accustomed us to these original ideas of animals. It sweats the stone for its shell.”

Local economy’s built-on protection

The slogan of local economy is, “Love your neighbor — shop local.” By this concept you bring wealth to your hometown and county. By testing out this idea and coming to live more fully within it, you are bringing profit — another word for sustainability — to Chattanooga.

Let’s think a moment about how trading with a local business makes the old hometown more sustainable. Consider first the idea of the multiplier effect of the locally spent greenback. This bit of local economy leverage occurs as your F$1 bill circulates in the local economy. You buy a hardback book at Winder Binder Gallery and Book Shop on the Northshore. Its owner, David Smotherman, spends part of the purchase price, say F$1, on a donut in the eatery across the street, which buys paper napkins from a restaurant supplier in a warehouse on East 11th Street, which pays an employee the F$1 who spends it on groceries at Buehler’s market on Market Street.

“Locally owned businesses generate a substantial local premium in enhanced economic impact,” says the Andersonville study of retail economics in 2005 which focused on a Chicago neighborhood. For every $100 in consumer spending with a local firm, $68 remains in the Chicago economy. For every $100 in consumer spending with a chain firm, $43 remains in the Chicago economy. For every square foot occupied by a local firm, local economic impact is $179. For every square foot occupied by a chain firm, local economic impact is $105.

The multiplier idea works to enhance business transactions in a given city. A local dollar creates a premium in value for the locale. But what happens if we consider the process in reverse? What are we to make of the idea that spending a greenback in a national chain checkout register creates a negative multiplier effect?

Siphoning profit out of Chattanooga (or your town)

It seems reasonable to suggest that a local dollar not spent in a Chattanoogan-owned business leaves much less to flow downstream. A dollar spent at a chain store may keep an employee on the job. But that is not saying much. Why?

Because wages are not profit. Wages in a city are not the same as the profit staying in the city. Profit of the foreign-owned company does not remain in Chattanooga.

Pretend every business in Chattanooga is like Einstein Noah Restaurant Group, which is planning six coffee and bagel shops in the area in the next five years, according to the Chattanooga Times Free Press. Einstein Noah, based in Lakewood, Colo., is publicly traded on the Nasdaq stock exchange and runs 815 eateries in 40 states and the federal city.

A share trades for about F$14 and holders of said shares were paid 12.5 cents a copy the last quarter. What if every business in Chattanooga exported all profit, as will Einstein Noah? That’s what a public company does. It exports profit from the place where it is generated to the owners. To owners come the profit. This statement is true whether the owner is an individual who owns and runs a Chattanooga service company, or a shareholder in Bangkok or a Muscovite who buys American shares through a French mutual fund.

Smartly, Einstein distributes quarterly dividends worldwide among investment houses, mutual funds and to individual investors. No one in Chattanooga gets a penny of the profit unless he owns shares.

A dreary scenario: No local companies

If every company and every business in Chattanooga had alien owners, we would be angry. We would be frustrated. Yes, many of us would be employees of these businesses, and we would serve local people. We would be poor. We would be dependent on outside aid, on outside grants. We would become even more solicitous for federal and state grants for streetscapes and road repair. We might become as a city objects of charity, just as Christians were in Jerusalem in the book of Acts — needing a handout.

I ask a lot of business people about prices, profit and cash flow. Jon Colston, who runs Music Instruction Studio with facilities in East Brainerd and Hixson, says he didn’t turn a profit in the business for seven years. But, finally, it came. If his outfit that employs 20 teachers and serves nearly 300 local students doesn’t turn a profit, those teachers lose their jobs and a competitor takes over teaching chords and arpeggios. Or there is just silence, with no one raising a hymn or a Van Halen. Without reward and capitalization, Music Instruction Studio is a failure and will be unable to serve its customers.

Buttered bagels and colonialization

Without profit, no business is sustainable. Without increase (as the Bible calls it) accruing to people in a city, that city is not sustainable.

Is it possible that the arrival of every out-of-town business is a form of colonialism? It is fair to say that each local company that is created, we all become richer, even though we don’t do business with that company. So, is it possible that with each out-of-state or out-of-county company that establishes a store or branch in our city, we lose the benefit of the multiplier effect, the premium?

Going a step farther. Is it possible that every company with foreign and alien owners is colonializing Chattanooga? One can cite examples of that sort of control. The British Empire established colonies in the New World so that it could maintain control of profit, and collect it in a system called mercantilism. The Americans, with their charters, were colonies and customers; Britain sought to prevent their becoming producers.

The American economy faces a day of reckoning from many quarters. Evidence suggests the masters of the country will handle it badly. They reject the marketplace, and work by committee, which cannot  weigh market and economic signals to adjust for imbalance and malinvestment. The less invested Chattanoogans are in national chains, brands, entities and promises, the more security we will have here. The more we invest in fellow Chattanoogans, the less wreckage and decapitalization locally.

Local economy, like the snail, sweats its shell. Let’s hope it’s solid, not brittle like bones of an old woman.

Sources, Jean Henri Fabre, Storybook of Science, part of the Baldwin Project, about books in the public domain

Shelley Bradbury, “Einstein Bros. Bagels announces plans to open fast-casual restaurants in Chattanooga,” Timesfreepress.com, May 16, 2013

Alfred Adask, “Corporations & the Multiplier Effect,” Antishyster, Vol. 9, No. 2, 1999, pp. 15-18

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