Self-sufficiency equals poverty

Patrick Gibbons

What is so great about buying local?

Supporters of this idea say that the money will stay in the local market and be reinvested back in the community. They say our economy would be self-sufficient and sustainable.

Economically, it is nonsense. I've already written about the green paper fallacy. If green pieces of paper go abroad, who cares? We get goods and services, and that is what is important. Here is another way of thinking about this issue:

Buying local means we have to forgo economic advantages that might be found in other communities, such as expertise or efficiency, and the division of labor.  The division of labor is the specialization that develops in a capitalist economy. Instead of trying to grow your own food, create your own clothes, or build your own cars, you devote your time to a single task and you let other people do the tasks, or portions of tasks, that grow your food, create your clothes, or build your cars.

What results is an explosion of productivity. By using our time more efficiently and becoming specialized, we produce more goods and services with fewer resources. In the end, we grow more and more wealthy. The resources and time we save can be used in producing even more goods and services that improve our lives.

Still, self-sufficiency has a romantic appeal to many. If the idea of self-sufficiency and sustainability sound really good to you, check out this locally made business suit. Not only is the thing repulsive to look at, but it was also incredibly expensive to produce.

Ninety-two percent of the material used for this suit was produced within 100 miles, and all laborers were local. Eleven people devoted 500 hours to producing this suit. Assuming no profit and that workers made minimum wage (sorry, no living wage here), the labor costs alone would be $3,625. Then you have to add in material costs and capital costs – and don't forget about the payroll tax!

In our capitalist economy, 500 hours of labor could produce hundreds of suits thanks to the division of labor and economies of scale that "buying local" and "self-sufficiency" cannot take advantage of.

When 500 hours are devoted to making just one suit, that is 500 hours that cannot be used to grow food, build cars, create electricity, etc., etc., etc.  We literally cripple our ability to build wealth.  "Self-sufficiency" is therefore often a road to poverty.