What is the theory behind a local economy and how is it different from what we know in Australia?
In a local economy the majority of financial transactions that occur are local. People provide goods and services purchased by neighbours. The majority of the labour, materials and energy required to make those goods or provide those services are local. Thus, money turns within the community many times. Called money turn, this is the fundamental characteristic of a local economy.
The parallel village proposes to not put all ones eggs in one basket, but participate in the global economy (sell local to global) while not relying on the global economy to provide for all ones needs (instead sell local to local)
If modern life was stable, living with a dependence on the global economy would not matter, but as events have dramatically shown in the past year or two, modern life can be decidely unstable. In January 2002 the price of oil was around US$16 barrel, in July 2002, six months later it was $22. In July 2008, the price of oil almost hit $150, and six months later in January 2009 it had dropped to $46. When people commute to work by car, they expect a stable income, but find the cost of getting to work can become unaffordable. It's not just direct costs of fuel. Food not only has an energy component in shipping, the industry is utterly dependent on petroleum for fertiliser, tractors, processing and all its support systems. While the price of oil was the hot topic in July 2008, this was blown off the front pages by the next crisis as governments had to guarantee that ordinary people would not lose their bank savings, given the instability in the global financial systems.
In a local economy, people know their farmer and they know their banker. However, the local economy is not the opposite of the global economy; it merely makes smarter use of the global economy, not putting all its eggs in one basket. In the parallel village local economy, a portion of those who earn a living will import money from the outside. Selling Local to Global. This is made possible by high speed broadband and reasonable proximity (within 2 hours) of a major airport. To learn more about this, see our article on the Economic basis for villages.
Once those businesses and people have earned money from outside the village, a concerted effort is made to keep that money turning within the village and surrounding region before it once again gets spent on goods or services beyond local. If a person commutes to work, then every time they (or the bus or train) fills up with fuel, almost all the fuel money goes overseas with only a small portion going to the local employees and the owner of the fuel station. If one walks to work, then one spends money on food to fuel the commute and shoe leather. The village intends to encourage long-term relationships with local farmers to supply the food, thus the money turns locally, and the village hopes to attract a cobbler to resole shoes locally as well. Of course, there are some limits. While a custom shoe maker may move into the village and supply some bespoke shoes, it would be unlikely shoes could be made locally for the same or lower market price than one can buy from overseas. In the big picture, such details are not important. They key is that a higher proportion of ones purchase-decisions become buy-local choices.
Once local people understand that how they choose to spend their money has impact on the collective wealth of their community, most will tend to make the intelligent decision to choose goods and services with a higher local content. This is where modern computer systems become helpful. It is possible to calculate local content if the data is collected on a community owned system. If the community uses electronic banking such as EftPos where it adds local content information at the time of purchase, informed people can easily make the decision to buy where their money turns more locally. This means local people have jobs, create wealth and are less vulnerable to the global distortions of the sort we witness in the present.
It's cheaper to save a dollar than earn one.
A major element of a good local economy is one where focus is also on lowering the cost of living. Homes will have thick walls with very high insulation and low leakage, resulting in less energy needed to keep warm in winter and cool in summer. By eliminating the need to drive, people do not need to own a household full of cars, and to bear the cost of maintenance, insurance, fuel, financing and depreciation. Their mortgage pays for their home, but they do not need a multi-car garage or driveway. Their local shops need not pass on the additional cost of off-street parking and the cost to build and maintain the streets is lower both because they need no on-street parking, and street maintenance is lower - pedestrians are lighter than trucks. While the global energy system has greatly contributed to the wealth of the world, it now is proving to have substantial costs. Removing those costs from the local economy go far to ensure its durability and vitality.
Innovations in technology mean a new 10,000 population village may investigate smarter utilities. They may use less electricity, and using the money saved on not having vehicle-scaled streets, local electricity production may be feasible. 10,000 consumers can establish an on-line wholesale buying group for non-local consumer goods, and if they employ a purchasing agent, they may negotiate for goods that come with easily recycled packaging. Further they can specify goods that last and are repairable, rather than ones that break down and become an externalised cost to be borne by the community or the regional ratepayer.
