July 07, 2012

Local Dollars, Local Sense

Two quotes from Michael Shuman's Local Dollars, Local Sense: How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity (White River Junction, VT: Chelsea Green, 2012).
These cars, appliances, gadgets, DVDs, computers, toys, housewares–all the stuff that is increasingly manufactured abroad–only constitute about a tenth of our total consumer spending.  Most of our expenditures on goods are for "nondurables" (goods that tend to be used or consumed quickly) like food, building materials, wood, textiles, clothing, office supplies, and paper products. 
The distinction on durability is critical, because imports of nondurable goods are particularly vulnerable to rising oil prices.  Compared with, say, durables like microchips, the nondurable goods tend to weigh more and contain less value per pound.  As energy prices and shipping costs rise, nondurable imports will be the first casualties.  This means that local production of food and clothing, coupled with local distribution, will once again be competitive against Walmart's cheap imported goods as rising transportation costs swamp long-shrinking labor costs.  We could see a renaissance of local manufacturing of nondurable goods worldwide.  (p. 31)  
Another approach to investment can be found in rural Sweden.  Exasperated by mainstream financial institutions that had been sucking up the savings of businesses and residents in Åres Gröna Dalar for investments thousands of miles away, an organization called Fjällbete organized some simple ways to invest in local food production.  Everyone from modest farmers to wealthy venture capitalists in the region can now invest in sheep, their sheds, their grazing land, and machinery for processing their wool and meat.  People can buy shares of these capital assets and then trade them with one another.  Because a land embankment defining the edge of a sheep-grazing area is called a vallen in Swedish, the locals joke that this is their Vall Street. (p. xxiii)
Shuman's book is about the merits and potential of local investing in local economies.  He covers regulations in the United States that largely prohibit and (in limited, specialized cases) permit a small, unaccredited investor to put money into small local enterprises.  An example would be equity in a cooperative store that returns a dividend to members.

I follow news from the Transition movement at transitionculture.org, and some of the initiatives they report on have to do with local investment in the United Kingdom.  For example, cheesemakers, bakers, and brewers borrow money from small investors to buy equipment to start or expand a business.  The business pays back the capital along with cheese or bread or beer that has a value that equals a return of so many percent.  It's not an equity arrangement, like a cooperative.  It's more like buying a bond.  So I hear these stories coming from the United Kingdom and I think, they must have different regulations compared to the United States.  I've never heard of investment opportunities like this in Canada either.  Not that I'm really in the loop about Canadian investing at the local level, since I'm living in another country right now.

This blog is about handspinning yarn and you are probably waiting for me to bring this around to spindles, spinning wheels, and the sheep next door.  I'm getting there.

In the quote above, Shuman states that at some point it could be cost-effective to produce cloth locally.  I think the crossover point is much further out there for cloth than for small-scale local food, which in some cases is competitive with imported food and domestic mass-produced food already.

I can see local cloth getting rejected for looking distinctive, for being marketed as a cheap domestic alternative, and for performing poorly.  Not that local cloth necessarily has to perform poorly but expectations today are narrow: we are used to colour-fast dyes, fine threads, few slubs, stretchy knits, consistent sizing, variety, and low prices.  (Cowichan sweaters have sidestepped pretty much all of these attributes and succeeded.)

There's a lot to do before startup manufacturing operations can produce local cloth.  I've posted before about how the infrastructure for cloth has gone away.  How textile machinery is gone from communities, shipped to other countries.  How local mills scrounge for parts to repair what's left.  How much is involved in getting materials harvested and processed to the point where the end user will buy the product.  The sticking point, in my view, is whether you could make a local textile product that people want now while you wait and bet that in the future imported goods will become prohibitively expensive.  If you can't, then it's pointless to get funding to manufacture any because you won't be able to pay back the lenders.

I wonder how much folks would need to be educated about local cloth manufacturing before they could evaluate business proposals for viability and decide whether to invest.  I mean understanding and shrewdness, not a sense that local cloth is worthy.  I talk to people and often find that cloth-making is like a black box to them; the process is mysterious until I demonstrate.  "This is how twist goes into the wool and holds it together.  This wool feels rough and this one is soft."  The onlookers catch concepts quickly and ask good questions but lack the correct vocabulary.  They tell me how astonished and delighted they are to see handmade cloth.  They wonder out loud how I know these things.  You can be intelligent yet uninformed with no basis for an opinion about what's possible, feasible, and desirable: a hazardous place to be in as an investor.

Shuman's book focuses on local investing in terms of trade, capital investment, business, and manufacturing.  The last chapter, "Investing in Yourself" goes over other strategies.  He writes about the benefits of building personal cash reserves so you don't have to rely on credit and pay interest, of paying for education to boost wage potential, of improving a house's energy efficiency to reduce utility expenditures.  Think critically about the author's assumptions, I spotted some that don't hold up in my experience.  Nevertheless.  I would like to say if you are looking for ways to reduce vulnerability in the marketplace then consider obtaining more durable and versatile textiles.  Get cloth that lasts longer and you lay out money less often.  (This tactic is similar to seeking energy efficiency and conservation before ramping up alternative energy production.)  Magazines tout classic styles that don't have to be replaced, but there's actually cloth that lasts longer than average because of its structure and its properties.  Flax, hemp, kudzu, the more sturdy wool breeds.  Naturally-coloured cotton, wool, and alpaca.  Some of these you can buy in shops, but others you can only get by sourcing and making the cloth yourself, commissioning it, or buying direct from a producer.  I've read that kudzu cloth clothing can be worn by three generations and some wool rugs will last a hundred years.  There are cloth structures (collapse cloth, sprang) and garment styles (pleats, deep hems) that allow for children's growth, maternity wear, and other changes in fit.

When making cloth at home with handspun, a person might consider return on investment.  But few use ROI to determine whether their handspinning is worthwhile.  As it stands, with the cost of spinning wheels, the time needed to re-skill, and the effort of getting good fibres, investment is usually greater than payback.  As far as I can tell all the handspinners I've met have been able to bear the costs without taking on debt and without having to generate cash from their products.  Out of those who stop making yarn, usually it's for lack of support and knowledge in their early stages or it's for lack of time.

Profit is not a big justification for owning personal collections of looms, spinning wheels, and boxes of wool.  It's about getting something done, not making a living.  When you look at this attitude in light of our wider culture's attitude toward kitchens, it's ordinary.  We want to make a pie at home, we get a pie pan.  We expect ovens in permanent dwellings, even folks who never cook.  Anyone who figures out a cost benefit analysis is deciding between a basic and a deluxe one or mulling the merits of an extra convection model.  We're not choosing between oven and no oven.  Yet there was a time in jolly old England when common people in the city didn't have ovens.
And at the same time there emerged from scores of bye-streets, lanes, and nameless turnings, innumerable people, carrying their dinners to the baker' shops. The sight of these poor revellers appeared to interest the Spirit very much, for he stood with Scrooge beside him in a baker's doorway, and taking off the covers as their bearers passed, sprinkled incense on their dinners from his torch.
–Charles Dickens, A Christmas Carol
Right now local cloth is uncommon.  It, and the means to make it, could increase.  I don't necessarily think such change all has to come through manufacturing and formal investment.

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