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The Importance of a Strong Local Economy: Why It Matters and How to Support It

The news is always going on and on about the economy and what’s going on with the economy; it seems like this large, unfathomable concept that somehow affects all our lives and is of super importance, but why? how? In its most simple terms, the economy is just the sum and flow of all the transactions made. It is how wealth is distributed and redistributed in society. When the economy is strong, it is because people have confidence that things are going well, and so they spend more money, which circulates the wealth, and societal finances hum along nicely.  When people lose confidence in the market and worry that the supply of wealth is somehow in danger, they stop spending so much money, which in turn slows the circulation of wealth and the economy takes a down-turn. Now, granted, this is a very rudimentary explanation and really only addresses the most basic parts of how “the economy” works.  However, it will suffice to illustrate how money spending has a direct effect on localized communities.

Buying Local, a Growing Trend 

When a person spends money at an establishment, it allows the establishment to pay its employees, buy more supplies, pay its operating costs, etc. The people working at that establishment take their portion of these funds and spend it again to buy other items, which in turn pays for another person’s wages and so on and so forth.  For a long time, most people did not really think about where or how the money circulates, we were just all happy to have some and be able to purchase the things we wanted or needed.  

More recently, however, there has been a growing voice about supporting local economies. While the global market is an incredible feat of logistics that enables people to purchase just about anything at any time, it does not benefit individuals and communities very well.  People have been noticing that with the expansion of the big-box stores individual, unique city cultures have diminished.  People have begun to see how it has become harder and harder for small, local businesses to compete with big corporate conglomerates. And people have seen how small towns and rural areas have suffered due to the consequent diminished strength of localized wealth distribution. In fact, local economies are the back-bone of our country’s success, and it benefits us all to support these smaller, regional systems.

What the Numbers Say About Small Business Impact

When individual communities face economic decline, they see population decline due to limited employment opportunities, limiting infrastructure and services, and limited long-term opportunities for young people. It’s sort of a self-fulling cycle, really.  Without resources, all of these things decline and that is felt even more strongly in small and rural communities, where access to alternative sources are limited.  [data here for the historical correlation of big stores and small town decline?] In this light, it becomes clear that while corporate chains provide cheap diversity, they also damage local prosperity.

Conversely, purchases from local businesses do the opposite. The Civic Economics Organization collated data from studies done in cities across the nation from 2002-2022. The results have been consistent and show that, on average, only 13.6% of revenue from corporate chains ended up circulating in the towns and communities of their locations. On the other hand, local businesses recirculate 52.9% of their revenue in the local municipalities (ABA Indie Impact Study Series, n.d.). That is a significant difference in the available economic resources for a given area.

Another study from the Small Business Administration in 2019 showed that small businesses created 44% of ALL economic activity in the country and created ⅔ of all the jobs in the nation.  They studied a 25-year time period and found that, in that time frame, small, local businesses created 12.9 million jobs (66% of all jobs) versus only 6.7 million jobs being created by large, corporate businesses (Wilmoth, 2022).

Given these data points, it makes sense that the push to support local businesses has gained traction, and it shows how these businesses actually benefit us all.  The more money that remains in any local region serves the people thereby allowing for hometown jobs, stronger infrastructure, overall prosperity and more unique culture.

Benefits of Strengthening Local Economy for Small Towns and Rural Areas

Job Creation

Jobs are a crucial component of fostering growth in rural areas. Many organizations discuss how local businesses create job opportunities and retain local talent that might otherwise migrate out of these communities. This allows communities to retain population and attract new residents. “By creating an environment that supports entrepreneurship and attracts investment, regions can stimulate job creation and cultivate a sustainable economic expansion” (Economic Development and Workforce Development: Nurturing Local Talent for Sustainable Growth, 2023).

Community Resilience

When communities have strong economies, they are naturally more resilient to disruptions. The more wealth circulating in a given economic pool allows for greater resources and planning to deal with disruptions.  By creating systems that are regional in nature, small towns and rural areas can deploy those resources more effectively. Purchasing local goods creates an environment where this becomes possible because the whole community system grows and strengthens  with the increased recirculation of money. This is especially highlighted in the food sector. The more robust a local food system is, the less likely residents are to see disruptions in their supply should some significant problem arise, such as we saw with COVID.  

Cultural Preservation and Community Identity

Local economies play a crucial role in maintaining the unique character of small towns and rural areas, contributing to a sense of place and belonging. This can be seen in the small boutiques, family-run restaurants, or local bookshops that make up the heart of many towns and cities. They provide a sense of familiarity and trust, building a community identity that residents can be proud of. Small businesses are more likely to form relationships with their customers, leading to personalized service and a better understanding of local needs. This often results in small businesses leading initiatives or contributing to causes that are important to the community. This uniqueness also boosts tourism because people travel to see different places. Too many big chains in an area detracts from this sense of unique character; this is one of the driving factors to revitalize downtown areas in many communities, to re-establish or bolster local identity. Local businesses are key in this development.

Steps Toward a Solution: Buy Local First

Even if each person shifted just 10% of their purchases to local business, it would have a huge economic return. In many places, it is difficult to buy all one’s necessities locally, but if people simply buy local as often as possible, it will positively impact that community in all the ways described previously. The impact is proven to stretch beyond restaurants and boutiques, too. A small, stable, rural community can support local industry, agribusinesses and small-scale manufacturing, which in turn grows the overall sustainability and resiliency of that community. 

Purchasing local first is an investment in community infrastructure. It creates a sense of belonging and encourages individuals and community organizations to work together to continue the development and success of the area. In rural spaces, vibrant communities also foster collaboration between neighboring small towns and rural areas to create regional economic development and growth. By pooling resources and expertise, communities can address common challenges and amplify their collective impact. This all happens when individuals invest in their local communities and keep more wealth circulating in local economies. Whether it’s a neighborhood or burg in a large city, or a remote rural community, the health and identity of that place is impacted by its local businesses. And, as the data shows, small businesses even drive the health of our national economy. So, local really does matter; support businesses in your hometown and use your dollars to make a true difference.


ABA Indie Impact Study Series. (n.d.). Civic Economics. Retrieved February 11, 2024, from

Economic Development and Workforce Development: Nurturing Local Talent for Sustainable Growth. (2023, August 7). Economic Impact Catalyst. Retrieved February 11, 2024, from

Wilmoth, D. (n.d.). Small Business Facts: Small Business Job Creation. Retrieved February 11, 2024, from

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