A Magazine about the Hudson Valley’s local economy, published by Hudson Valley Current.

Localizing the Supply Chain

The hart of a healthy economy may be at local level   
by David McCarthy  
We hear so much talk about “buy local” or “support local farms” that it might seem like just so much marketing talk. I don’t think that is the case, but it’s worth taking an in-depth look at the whole subject of localizing the economy. What’s so important about it? How does it help?
When we talk about “an economy,” it can apply to a wide range of scales. Economists typically start with the household economy as a basic unit, and move upward in size, all the way to the global level. Historically, of course, there has been a lot of emphasis on national economies.
It has been known for hundreds of years that a primary way of growing an economy is what is known as “import substitution.” For example, Alexander Hamilton’s “Report on Manufactures,” submitted to Congress in 1791, advocated the growth and independence of industry here in the newly founded United States. It was essentially a program to develop the capacity in this country to produce the sort of things that then came mostly from Europe—in short, import substitution. It has been argued by economic historians that every modern economy that has become prosperous has gone through a phase of import substitution. In the 20th century, many countries in the Global South turned to government-sponsored import substitution as a way of reducing their dependence on imports from the US and Europe.
The great urbanist writer Jane Jacobs regarded cities, not nations, as the most natural unit for understanding economies. She used the term “import replacement” to refer to the process of developing a city economy by progressively localizing the manufacture of products for local use—or for that matter, for export. She saw the synergies that developed between entrepreneurial innovation, the growing skills of workers, and local financial systems as absolutely key to the flourishing of a city economy. In this argument, she drew parallels with the science of ecology. In her 1984 book, Cities and the Wealth of Nations, she said:
“…the more niches that are filled in a given natural ecology, other things being equal, the more efficiently it uses the energy it has at its disposal, and the richer it is in life and means of supporting life. Just so with our own economies: the more fully their various niches are filled, the richer they are in means for supporting life. That is another way of saying that economies producing diversely and amply for their own people and producers, as well as for others, are better off than specialized economies….”
If localizing an economy—either at the national or city level—has historically been seen as a proven key to development and prosperity, it still remains to be seen where we stand at this interesting juncture of place and time, here in the Hudson Valley in the early 21st century. There are a number of unique factors to consider. Though we have several substantial cities such as Poughkeepsie, Newburgh, and Kingston, and many smaller towns, we tend to view the local economy in regional terms. Re>Think Local, for example, a business membership organization specifically devoted to triple bottom line localism, defines its geographical scope in terms of counties: Dutchess, Greene, Orange, Putnam, Sullivan, and Ulster. Regional economies tend to be based on natural features (in our case the Hudson Valley) more than manmade boundaries, but for precisely that reason they can be a bit amorphous in economic terms. In the case of our region, there’s also an elephant in the living room that is not even in the living room, but just down the road: New York City. Being situated just outside one of the great metropolitan areas of the world, with its immense city economy, casts a huge spell over this region. New York City affects us in so many ways, even if our allure is, for many, that we aren’t New York City.
Any finally, there’s the historical factor: The Hudson Valley is a poster child for post-industrial America. We’ve seen the ravages of rampant industrialization. Some of its horrible effects, such as PCB contamination of the Hudson, are still with us. If localizing the supply chain involves reintroducing manufacturing, will we accept it? Or will we be content with remaining more or less dependent on imported goods? And does that matter? Perhaps localizing our economy could just mean a strong trend toward locally owned service and retail businesses, and a healthy and developing farm economy. If that’s the definition, we’re doing reasonably well. There is certainly movement and awareness in those areas.
The notion of a “supply chain” is one that’s usually used in big manufacturing operations, and I used it intentionally in the title of this piece. The fact is that everything we consume has a supply chain of some sort. For manufactured goods, it is not just the goods themselves that usually come from far away. It is also a matter of the materials that make up the goods, the equipment used to produce the goods, and the whole system that transports the goods. Seen in its completion, the supply chain for everything is essentially the world economy. Everything we use has a footprint, and not just a carbon footprint. In many cases it is also a footprint of human suffering. Localization, if it is done intelligently, can reduce these footprints in dramatic ways. That’s why people who talk about sustainability always talk about localizing.
At this juncture in history, the stakes—for any region, not just our own—are much higher than just jobs and general prosperity, as important as those things are. The stakes involve fundamental issues of economic security: things like food security, energy security, and the stability of financial systems. Sustainability and security are deeply related in their meaning, when you think in terms of the preservation of human culture at a fundamental level. By security, I’m not talking about sustaining the unsustainable, the frivolous, and the misdirected aspects of our economic life. Those things can pass, perhaps painfully in some cases. But we need to look carefully at vulnerabilities at a very basic level, the level of necessities, and try to address those vulnerabilities while we still have time.
For all these reasons, we need to think very openly about the kinds of development we will encourage and accept as we go forward. Rebuilding our manufacturing base, for example, could have a very positive effect both short and long term, if it’s done right. The same with energy development (and no, I don’t mean fracking). What’s exciting about this region is that the factors are all here for a vibrant, diverse and secure economy long into the future. If we learn the lessons of history and cultivate our wisdom, we are in a good position. Localism is not an isolationist mentality, nor is it some sort of new-fangled idea. It’s a proven strategy, not just for prosperity, but for sustainability in every sense of the word.
livelihood@countrywisdomnews.com