First published on ABC Unleashed
Under Local Jobs First, when state agencies and corporations buy their wares, they’ll factor in a 20 per cent discount on Australian manufacturers’ tenders.
Unions liked it. Trade experts, the European Union and the US government did not. The Age‘s diplomatic editor, Daniel Flitton, viewed the measure through the dark and troubling prism of nationalism.
The morning after the NSW budget, bright and early, Federal Trade Minister Simon Crean denounced the policy on Sky News. It would cost jobs, he warned, not save them, and could draw similar moves from other countries. It would threaten trade.
But must trade always be the last word?
Less than an hour after Crean spoke so unequivocally on Sky News, American economist and writer Michael Shuman spelt out a different kind of economic development on Radio National.
“Locally owned businesses that are focussed first and foremost on local markets,” he told Life Matters presenter Richard Aedy, “contribute substantially more to economic development than … schemes to attract or retain non-local businesses.”
Shuman’s two most recent books are Going Local: creating self-reliant communities in a global age, and The Small-Mart Revolution: how local businesses are beating the global competition. You get the idea.
On tour in Australia, he’s spruiking the myriad benefits to be had from boosting our local businesses – from better labour and environmental standards to stronger long-term wealth creation and higher, more resilient employment rates.
The crux of Shuman’s argument, in economic terms, is about the flow-on effect of our spending choices. “When you spend money locally you contribute to what economists call the economic multiplier,” he said on Radio National. “That is, when I spend a dollar, say at a local pharmacy, that pharmacist pays people, they then take their dollar to a local grocery store … you have a dollar that is circulating in the economy. The more times that dollar circulates and the faster that dollar circulates without leakage, the more income, wealth and jobs [it creates]. And it turns out that local businesses do this much better.”
He points to a 2003 study in Austin, Texas, where economists analysed the impact of a proposed Borders bookstore against two local bookstores. They found that $100 spent at Borders would circulate $13 in the local community, while $100 at the local stores would circulate $45.
Shuman draws a distinction between local and non-local ownership, not between domestic and foreign. In The Small-Mart Revolution, the economist criticises promotion of “America First-ism” at a cost to others. Instead, he envisages a future of growing trade and global engagement, albeit “in goods and services less and less vital to day-to-day today survival”.
So where does the buy-Aussie policy fit in?
Despite the fuss, it’s neither a breakthrough nor a break down, and it won’t start a trade war. The rule already existed – NSW just expanded its application. Other countries, state governments and local councils also have guidelines favouring local procurement. And, despite Crean’s protestations, the Australian Labor Party’s current platform includes an almost identical policy.
That’s not to say it will work. According to the localisation theory, an ideal government purchasing system wouldn’t target Australian-made. It would target the tenders that boast the highest multiplier – probably goods made and owned nearby, not nationally.