When Buying Local Doesn't Build Community Wealth

Buy local. Support local business. These are the rallying cries that community-boosters (including

myself) use all the time. When you spend money at a local business, the theory goes, more of that money circulates in the community, supporting other local businesses as well as charities and boosting the local tax base.

Except when it doesn't.

Maggie Anderson, the author of Our Black Year, opened my eyes to the fact that, in many neighborhoods—especially poorer Black ones—the 'local' businesses are not owned by people who live there, so the money spent at them flows right out of the community. African Americans account for 14% of the population, but they make up only 5% of business ownership in this country (and most of those businesses are sole proprietorships). The reasons are complex, but the reality is that, while African American buying power has surged, little of that spending is actually helping build wealth in Black communities. 

Anderson cites some startling statistics:

A dollar spent locally circulates nearly a month in an Asian American community before the money flows out.

In Jewish communities, it sticks around for about 20 days. 

White Anglo-Saxon Protestant neighborhoods enjoy a locally spent dollar for roughly 17 days. 

African American communities? Six hours. 

  

All neighborhoods have "leakage" — money that flows out of the community and into the hands of nonlocal business owners, chain stores, bankers, landlords, etc. But it's particularly acute in some Black neighborhoods. For every $100 spent in an "underserved Black community," about $95 leaves, says Anderson, citing a 2004 report. 

To call attention to the lack of Black-owned enterprises, she and her family spent a year trying to buy only from Black-owned businesses around their Chicago neighborhood. The results of this Empowerment Experiment, as they call it, are chronicled in her book. I won't be spoiling anything to say that it wasn't exactly a rousing success.  

Anderson's book is a reminder that not all neighborhoods are created equal, and that the 'local' movement must become more diverse (to its credit, the Business Alliance for Local Living Economies featured Anderson as a keynote speaker at its 2012 conference, where I found out about her project and book). 

So when I heard about the Kingonomics conference taking place this week in Washington, DC, I was intrigued. Timed to commemorate the 50th anniversary of the March on Washington, where Martin Luther King gave his enduring "I Have a Dream" speech, it brings together entrepreneurs, innovators, civil rights leaders, businesses and investors inspired by the economic philosophies of Dr. King. Yes, economic philosophies. As Kingonomics author and conference organizer Rodney Sampson explains, many people don't realize that Dr. King was very focused on economic issues, believing that without economic opportunity, people do not have the chance to pursue happiness. Before his death, King campaigned for an "economic bill of rights" and called upon the government to invest in rebuilding American cities.

"The modern day civil rights movement has evolved into an economic rights movement for all to participate," writes Sampson. To that end, the conference entails two days of entrepreneur bootcamps, capital raising education, crowdfunding and pitch competitions for entrepreneurs, capped by an "Emancipation of Capital" gala. 

This is where I get excited about the potential for crowdfunding to help minorities, women and other entrepreneurs too often cut off from traditional funding sources. At its best, crowdfunding is about democratizing access to capital, so that ideas get funded based on their merits, not on powerful connections or where you went to school. So here's to MLK's dream, and the dreams of entrepreneurs everywhere, to make a difference in the world. We just have to give them a chance.