Let’s grow pineapples in the Finger Lakes. Well, maybe not…

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerThe proposition that we should “Buy Local” is appealing. We may continue to buy apples from Chile and lettuce from California, but we have the common decency to feel guilty about it.

But do we need to?

American producers of beet and cane sugar have long supported a Buy Local policy. Dominated by a relatively small number of large and politically savvy producers and processors, these “buy from us” sugar interests keep prices high through official U.S. policy that includes a robust quota and tariff regime. Protectionist trade policies for American sugar acquire additional political weight from the powerful Midwest corn lobby, as cheap sugar from Brazil, Thailand and other countries also competes with corn sweeteners. Corn sweeteners—only 13 percent of total sweetener deliveries in 1970—surpassed beet and cane sugar in 1986 and now contribute 20 percent more to the sweetener market than refined sugars.

Protection for U.S. sweeteners encourages U.S. producers to use copious amounts of energy, fertilizer and pesticides to grow cane sugar in watersheds feeding Florida’s Everglades. It also diverts Midwestern land from grain to sugar beets and harvested corn to sweetener use. The U.S. Department of Agriculture reported in 2007 that the cost of sugar production in the United States was at least twice that of the world’s low-cost providers. Although it takes energy to transport sugar from Colombia or Guatemala, the additional transportation cost pales in comparison with the economic and environmental cost of growing sweeteners in the United States.

Readers supporting Buy Local initiatives are now crying foul: “Don’t confuse us with Domino and Archer Daniels Midland!” Self-dealing by the sweetener lobby is the most egregious case of a Buy Local policy gone awry. Yet the principle is important: Regardless of how we define “local,” we can’t measure the moral or economic content of a purchase by simply measuring the distance from the point of production to the point of consumption. A food crop cultivated with animal power in a distant country, then transported bulk to the U.S., is probably more energy-efficient than the same crop grown 50 miles away using mechanized production techniques and petroleum-based fertilizers and brought to Wegmans in a pickup.

Buy Local has gained some traction from the recent run-up in energy prices. Expensive fuel is changing the geography of production. CIBC World Markets reports that the cost of shipping a container from Shanghai to the East Coast rose from $3,000 in 2000 to more than $8,000 today, shifting the relative competitiveness of many countries, such as Mexico versus China. Higher fuel prices will not spell the end of globalization, though. Transportation cost is only one factor in play.

The Buy Local argument is about more than economics, and often rests on a moral or ethical foundation. My friend Michael Warren Thomas, founder of SavorIndependents.com in Rochester, speaks passionately of the role independent businesses play in the community. I’ll agree that large retail and service businesses have exacted a price in terms of community character and business diversity. Yet even the-retailer-we-love-to-hate, Wal-Mart Stores Inc., has conferred benefits on consumers by its relentless innovation in supply chain management. But that’s fodder for another column.

For many, Buy Local is a matter of personal values. We may prefer to buy from someone we know over someone we don’t. We may choose to pay more for a product that is local and handcrafted than for a product of similar function from a distant factory. Yet when personal values become the foundation for public policy, we must justify our position accordingly and appeal to shared values, not a misplaced analysis of economic benefit.

With few exceptions, public policy should stand the test of universal application. With apologies to Immanuel Kant (and the philosophers among my readers), I endorse some variant of his “categorical imperative”: We should pass laws that make sense even if they are also adopted by every other community. As a mandate, Buy Local fails the test.

Buy Local helps the economy only if we’re the only ones who adopt it. We wish to require local purchase while promoting our products in other markets. It is a reincarnation of the mercantilist philosophy that dominated Europe in the 1600s. The goal of the mercantilists was to sell as much as possible to other countries while buying as little as possible in return. We want our neighbors to spurn California wines in favor of Finger Lakes produce, but urge the residents of Cleveland and San Diego to buy our apples and sign up with Paychex Inc. We want to retain our college students—and keep theirs, too. We cheer when Pictometry International Corp. signs up partners in Europe, but frown on Iberdrola S.A.’s acquisition of Rochester Gas and Electric Corp. In a competitive economy these are things we can wish for, but should not enshrine in local laws.

The Buy Local ethic lies behind the city of Rochester’s push to hire only city residents. “City payroll dollars should support the city economy,” goes the argument. The motivation—to revitalize Rochester’s economy—is laudable, as are many of the motivations behind the Buy Local philosophy. Yet this “hire local” policy fails on two counts. First, it violates the test of universal application (a kind of public policy “golden rule”). Perhaps this is a policy all can adopt—but universal application would be obviously counterproductive. If Rochester hires only Rochester residents, will Brighton do the same? And Mendon, Irondequoit, Macedon, Albion and every other community in the area?

Second, if the purpose of the policy is to encourage a vibrant economy, the residency requirement fails again. Retail and service dollars are spent, whether by residents of Rochester or residents of Chili, where the stores and businesses are located. A residency requirement affecting a relatively small number of current or future city employees will have no noticeable effect on conditions encouraging businesses to locate within the city. Business location decisions are more influenced by the effectiveness of the city’s administration than by shifting a small number of people into city neighborhoods. Limiting the pool of candidates for city positions is not the way to create a vibrant economy.

Buy Local is a responsible expression of personal values. Yet as public policy, it is ultimately isolationist and divisive.

Kent Gardner, Ph.D. President & Chief Economist
Published in the Rochester (NY) Business Journal August 15, 2008