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Clayoquot Green Economic Opportunities Project
SECTOR ANALYSIS
PLUGGING THE LEAKS
Source: RMI
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One way to make a local economy healthier is to plug the leakage of dollars and other resources from the community, instead keeping them circulating within the community. This is also known as the "multiplier" effect. If money is received and then spent outside the community the multiplier is only 1. If the money stays in the community its local benefit increases every time it is spent (the multiplier increases). To increase the multiplier in their local economy a community first needs to determine the ways that money flows out. There are two main sources of money leaks - purchases from outside the community (imports) and outside investments/bank savings. Every time someone buys something from outside the community dollars leak out. To balance this drain of dollars an equal amount of money must flow back into the community in the form of exports or attracting tourist dollars. A different approach can be taken. By replacing imports with locally manufactured products or locally provided services (called import substitution), a community can generate new businesses which, in turn, may cause a chain reaction of even more new business start ups (e.g. production of local jam could lead to a new business to produce jars or lids or labels or marketing firms). Another advantage of "plugging the leaks" in the local economy is that it reduces energy use and pressure on transportation infrastructure as goods are brought in from outside or residents travel to obtain needed services. |
A common analogy for the community economy is the rain barrel. The shell of the barrel represents the structure of the community economy. The water entering the barrel represents resources of the economy, such as income, government support, or investment. If the barrel is full, then the material needs of the community are being met. The extent to which the level of water (resources) fluctuates in the barrel depends upon one primary factor, the extent to which resources "leak" out of the community. If a community is particularly dependent upon external goods and services, then resources will leak out of the community economy, serving the financial and employment needs of another community.
Import substitution seeks to identify these leaks and develop programs or businesses that either produce the needed goods and services locally or encourage citizens to support existing local businesses. There are many ways and examples of import replacement methods and businesses. Buying lumber from a local sawmill instead of externally controlled forest companies helps keep dollars within the community. Purchasing produce from a farmers market or community market instead of a chain grocery store ensures that your dollar stays within the community and multiplies its value within the local economy. - Smith (1999) |
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Buy-local campaigns are one way to encourage people to spend their money on local products instead of imports. Another strategy to encourage buying locally is the issuance of local currencies. A number of towns in Manitoba and Saskatchewan have set up community cash programs whereby local credit unions issue the "cash", which is really a type of coupon, to individuals who then are able to spend it like regular money at stores within their community. The attraction to consumers is that they have three months interest free spending before they have to pay the credit union in dollars what they have already spent in "community cash". Local businesses pay the intervening interest but they also benefit because of the increases in sales. |
The town of Tropic, Utah, had been in economic crisis since its timber mill closed in the early 1990's. In 1995, students in a high school entrepreneurship class noticed that tourists visiting nearby Bryce Canyon National Park were buying a lot of bottled water. As a result the class began its own business producing locally bottled water from Bryce Canyon and, is so doing, has helped to revitalize the town's economy.
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The local exchange trading system (LETS) is similar strategy for stimulating local exchange. First started in the Comox Valley of BC, there are now LET systems set up in several communities across the province, and hundreds worldwide. In the LET system trade occurs among community members without the use of money through a system of barter credit in which members advertise their services and wares in a monthly newsletter and "sell" them to each other for a "green dollar" price that they set themselves. Each member has an account at a central computer to track of transactions. Collective barter systems work best in communities where money is scarce, unemployment high, people have skills and time to contribute, and needs to fulfill. It is one way to create local employment and purchasing power without having to borrow or spend money. Cowichan has a barter system set up for child care. However, LETS requires a committed champion.
New wealth is created when an economy can produce more while using the same or less amount of energy and resources. In other words, if a commodity can be used more efficiently to achieve the same net result then "money saved is money gained." An example is the town of Osage, Iowa, population 3,800. By introducing energy efficient devices and programs to its local residents and businesses, the town was able to put some $7.8 million back into its local economy between 1974 and 1991. In 1995, electric rates were 50% lower than the state average. Fox River Mills, a major employer in Osage, was able to cut its production costs by 29% because of the lower rates and energy savings with the result that the plant was able to expand and triple the number of its employees.
Strategies that promote the start up of value-added enterprises is another expression of resource efficiency - extracting the greatest amount of work and energy out of a given resource. Recycling of used materials can also be a strategy for turning waste into profit, extracting more from a given resource. For example, there is a growing market for use of recycled paper.
One of the keys to successful import substitution is to match up local suppliers with local purchasers, to provide a brokering service for local businesses. The Oregon Marketplace, started in 1987, was set up to match buyers and sellers of Oregon products. In the first year it created 100 new jobs and $2.5 million in new contracts by matching the products that businesses purchase and finding local suppliers to fill this demand[1].
Tofino-Long Beach Chamber of Commerce took the first important step in 2002 in determining what products and services might be missing in the community by surveying their members. The survey asked what percentage of their business (49%) and personal (61%) shopping they did locally. Based on these statistics, it would appear there is room for improvement. The next step, however, is to ask what kinds of products and services they purchase outside of the region and to analyze which, if any, could be feasibly provided in the region.
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The aquaculture industry, for example, may provide opportunities for secondary industries including net cleaning and storage. Since traditional net cleaning causes environmental concerns about copper nitrate in the netting and the treatment of contaminated water after washing[2], a 'green' community has the opportunity to show environmental leadership by undertaking a green net cleaning process. Discussions are underway in Ahousaht about establishing such a venture. Entrepreneurs such as Dick Johnson of Canadian Fabricators Ltd., Alert Bay have taken up the challenge of designing innovative, environmentally responsible systems for net cleaning. Johnsons' design is a self-contained barge-mounted system expected to cost approximately $800,000 to construct[3].
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In our interviews several services and retail items were identified as 'missing' from the local economy. These provide a starting point of business ideas for "plugging the leaks", either by adding new product lines to the inventory of existing businesses or by starting new ones:
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- Office supplies
- Photo developing
- Green building supplies (reused wood, low flush toilets, solar panels
- Fly ash concrete (also for green building)
- Electrician
- Plumbers
- Used clothing/thrift store
- Fish market/dock side sales
- Surfboard repair
- Bicycle repair
- Web design and computer services
| Salmon Arm is in the midst of a number of new retail, commercial and service sector developments that will enhance its position as a regional commercial/retail centre. The Salmon Arm Strategic Plan commercial/retail strategy includes: development of a mentoring program on "taking care of and supporting existing businesses; foster working relationships between business groups to support and present a unified image of our commercial community, yet promote uniqueness; and conduct an import substitution study to identify business opportunities for local residents and improve the self-reliance of the Salmon Arm local economy
To facilitate local business expansion and retention, including the commercial/retail and construction sectors, the Salmon Arm Economic Development Corporation launched the Business Expansion and Retention (BEaR) program. The BC Ministry of Community Development and Human Resources Development Canada provided funding. BEaR aids communities in understanding the issues and opportunities facing existing local business and identifies, sponsors and/or assists in the implementation of activities that help businesses thrive.
To date a database of businesses by industry sector has been created and interviews have been conducted to identify and understand the challenges, concerns and future plans of local business. Out of 250 businesses, 188 identified areas of assistance or concern, primarily in marketing and use of the Internet. A number of specific initiatives have been launched as a result:
- Business information and assistance (e.g. with financing, marketing, exploring export opportunities and human resources),
- Web site development seminars,
- Initiation of a Marketing/Training team,
- Facilitation of local educational and service provider organizations to address identified business needs,
- Provision of information on "Secret Shopper Program" and similar customer service programs,
- Initiation of relationship building and linkages between professionals and business services, identifying opportunities where they might service the business community,
- Promotion of the Business & Community Employer Network Technology System (BCENTS) with local business as a marketing tool,
- Referral of businesses to the Tourism Coordinator to explore product promotion opportunities, and
- Establishing a resource library.
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For First Nations communities with limited commercial and retail operations in their reserve communities the problem of leakage if often particularly severe. A concept referred to as attractors suggests that certain key services are needed for people to shop locally. These include a post office, bank, coffee shop and grocers. Several suggestions that could help address leakage in Ahousaht have been raised, including a coffee shop/bakery/Internet cafe and the relocation of the post office from a general store a short boat ride away into the community-run grocery store. The process used by 'Namgis First Nation to convince their local credit union to open an on-reserve branch may be worthy of further investigation.
There are three major areas one can look to for plugging leaks out of local households: food, energy and construction and renovation. Energy conservation is discussed in the analysis on Green Energy.
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As part of developing an Economic Development Strategy the Salmon Arm Economic Development Corporation, along with Shuswap (regional) construction industry professionals identified significant economic opportunities due to predicted growth rates. The Shuswap Construction Industry Program (SCIP) was launched to capture more of the financial benefits from this growing market for local firms. Activities included a background survey, the creation of a "plan room" where local contractors can view blueprints for local construction projects, the development of training programs and a construction labour pool, an awards program for developers using local contractors, and the hiring of a construction industry coordinator.
In Plymouth, UK a minimum local employment code of practice was agreed for all of the city and health contracts building work. Members of the Plymouth Employment in Construction Partnership agreed to provide support for the inclusion of training and local labour schemes in construction projects. In nearby Luton a local builders' cooperative was formed and has competitively won tenders for contracts, thus keeping a lot more money locally.
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Local organic food production is discussed in the Green Products and Services analysis. Opportunities for greenhouse production expansion to meet local demand is thought o exist. A number of people supply eggs. While chickens, rabbits and ducks have been suggested as potential sources of local meat supply, others expressed concern about health-inspected facility requirements for commercial sale of these products. Possibilities for local food production warrant further investigation.
Perhaps the most significant opportunity for "plugging the leaks" is in the field of construction and renovation. Residents complain that local tradespeople are too busy with the big jobs (e.g. lodges) to get to household repairs. At the same time reports suggest that local companies (construction in particular) are too small to bid on big construction jobs. Yet with a building boom in the region (on and off reserve) the opportunities for employment in construction are significant. Cooperation between local governments and the construction industry, among construction firms themselves, new business development and construction training are all possible strategies for capitalizing on this opportunity and minimizing the amount of construction-related revenues that leave the region. A Nuu-chah-nulth operated trades and construction firm co-owned by the region's five Nations, possibly run by Ma-Mook, was suggested.
Other communities such as Salmon Arm and Plymouth provide examples of how to organize to better take advantage of such opportunities.
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[1] Adapted from Nozick, M. et al 1997
[2] MacLennan 2003
[3] Alby Systems 2002
List of Key Resources and Contacts
Publications
- Alby Systems. 2002. Letter regarding Canadian Fabricators proposed net cleaning system.
- MacLennan, D. Questions arise over net washing business. Campbell River Courier. Jan. 8, 2003.
- Tofino-Long Beach Chamber of Commerce 2002 member survey.
Internet
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