Consumers Buy Into 'Buy Local'

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CITY FUNDING

Not everyone is convinced. "Productivity creates wealth," says Russ Roberts, an economics professor at George Mason University. "It doesn't matter if you keep the money in your [local] economy." In fact, he says, while it's simple to count the jobs gained by promoting local purchases, it's impossible to measure accurately the jobs lost because of a change in buying habits.

People tired of boarded-up downtowns reject that view. Tacoma, Wash., Santa Fe, N.M., and Bozeman, Mont., have all provided five-figure grants to help start independent business associations. Utah Local First, with 2,500 members, gets funding from both Salt Lake City and the county. Grand Rapids Local First helped persuade its town to give a 1% bid preference to local businesses. And on Feb. 8, New Mexico's House of Representatives voted unanimously to allow the state to move up to $5 billion of its money into local banks or credit unions.

In Grand Rapids, Chris Lampen-Crowell's Gazelle Sports sells sporting gear and shoes at full retail price. That's a tough gig, with Foot Locker (FL), Finish Line (FINL), Dix Sports, and MC Sports—never mind the Internet—all within easy reach of his shop. Growth "has been steadier since we joined" Local First, he says, and his 2009 sales rose 7%, thanks in part to contacts he's made through the group.

Art Johnson, chief executive of United Bank of Michigan, with 11 branches within 30 miles of Grand Rapids, says customers like the fact that he's not a Wall Streeter. "People ask if we are really local," he says. "We have to prove it to them." His response: Ask other bankers what their stock symbol is. "If they have an answer, they're not locally owned."

Kimberly Weisul is editor of BusinessWeek SmallBiz .