Re: multiplier effect of farm markets (long)

Douglas B. Johnson (
Thu, 5 Feb 1998 13:11:31 -0600

I guess I had some time on my hands...I should put this much effort into
challenging the proposed rule.

The issue of the multiplier effect is complex. I see from the end of
O'Sullivan's post the recognition that we need to study how the farmers
that received the WIC coupons actually spend their total gross receipts
from the farmers' markets. Think about this for a minute:

Electricity bills are paid to some distant company and with deregulation
sourcing could be even more distant-no local multiplier here. Same for
heating oil, natural gas, and to a lesser extent even gasoline or propane,
though the local vendor is sure to keep some marginal percentage to pay
salaries to the clerks and retain marginal profit.

How about the mortage on the farm-is any of that payment retained locally?
With mortgage reselling among banks, and bank ownership concentrated in
holding companies, it is increasingly less likely.

Clothing for the family? Sure, there are lots of textile mills in North
Carolina, for example, but unless the family makes their own clothing from
locally secured cloth, it is perhaps more likely that their clothing
dollars escapes town, too. Gandhi saw this as a form of oppression. Even if
they buy at WALMART because they love those low prices, they are exporting
their dollars to Bentonville Arkansas, save the pittance of a wage a few
locals take home and the change the town collects on the tax collected by
the city or county from Walmart. Maybe the community gave WALMART tax
breaks to build thereby reducing the multiplier.

Coke, Fritos, pizza, potato chips, lots of the food purchased by most of us
(I haven't had a soft-drink in 20 years, but I drink copious amounts of
foreign-raised coffee) enriches anything but the local economy. Perhaps the
local community is bestowed with a bevy of stockholders in Coke or Pepsico
that makes buying Colonel Sanders a somewhat more local proposition. A
quick calculation here, too, will likely reveal a net loss. Locally-owned
cafes might not be much better if the purchasing is fed by a SYSCO or
RYKOFF or other purveyor of fine institutional #10 cans. How many of those
local cafes use local veggies and meat, or organic flour? I drove semi a
few years back. One odd load had me pulling up to a Ralston-Purina plant
that made primarily dog food. One sideline of R-P was institutional frozen
foods and the operation I visited shipped for people and pets...I was
amused that frozen boxes of 64-portion lasagne destined for a cafeteria
chain in Indiana came out of a dog food plant. So those folks eating
lasagne at the Hoosier-owned cafeteria perhaps thought they were helping
the owners be good community members, when in fact the "Italian" meal was
anything but local.

Perhaps the farmers at the market are not so mainstream, and instead
reflect a deep-commitment to alternatives such as buying local hay, or some
additional feed for poultry and livestock, and in fact, the family eats all
their meals from food produced and canned at home. But try fencing,
erecting a plastic-covered hoop house or building a barn with local lumber.
Here, too it is my guess that the bulk of these expenditures are returned
to some manufacturer that is not in our own community and the only change
that multiplies is the wage of the local worker and the tax collected on
the local vendors' property and the sales transaction.

Let me venture into unfamiliar territory by suggesting that when the
farmers' market vendor spends that $40,000 in revenue, that less than 20%
stays in the local economy, even when the farmer puts the cash in a
neighbors' hand. I haven't a clue how this results in a 7-8 times
multiplier. I would also hypothesize that the use of local currencies like
the Ithaca community dollars (I do not recall what they call it), or here
in Madison, "Madison Hours" (once again, not sure of exact name) might
restrict or limit exchange to the local community.

I am intrigued by the notion of the multiplier effect, but as you can see
from this post, calculating it with any accuracy is an accounting and
economic nightmare, especially if we neglect to take into account all the
nuances of corporate structure and ownership. Yes, "it all depends" on a
lot of things. I surmise that the calculation of the multiplier effect is
like learning archery-while you can see the target clearly, achieving
accuracy is a real challenge and we can only improve our skills by taking
more shots at the challenge before us. There's a whole lot of things that
are making the target obscure.

Finally, I would add, after reviewing the last paragraph in O'Sullivans'
post, that the social value of farmers' markets should not be confused with
the economic value. I appreciate that the study of the economy is a social
science, but believe that the social value of farmers' markets lies in the
quality of life created by real, personal relationships formed among
buyers-sellers-families-children-community-environment, and not in the
symbolic means of exchange represented by the dollar. Social value is
inherently difficult to quantify, as the social value of relationships is
more accurately, albeit subjectively, assessed in terms of quality. If the
multiplier effect is an economic phenomena that is as difficult to grasp as
how the Hubble telescope has meaning to the everyday citizen, then we are
looking in the wrong place for arguments that have meaning and potential to
people faced with choices of how and where to purchase their food.
Remember, in Oz, it was the dog Toto that pulled back the curtain and
revealed what was really going on. The reasons for selling-buying from
farmers' markets never need to be so complicated as the multiplier effect.

>Several people asked that I pass along the answers I got on my question
>posted a couple of weeks ago. I asked if anyone had information on the
>multiplier effect of local farm markets. I asked that question because I
>remembered some statement somewhere that money spent in certain autarkic
>communities might circulate within the community for 7 or 8 times before
>being spent outside the community. This was in distinction from other
>communities which wanted to be more autarkic but did not show this
>multiplier effect but immediately spent a dollar received back out of the
>I received half a dozen or so responses. There was strong agreement that
>it all depends. This makes sense to me but doesn't really help with
>promoting and justifying farm market development and gaining support from
>local governments. In North Carolina for example we have four large
>"farmers markets" run by the NC Dept of Agriculture. These are located in
>or near cities and are on interstates. We have local community farmers
>markets spread across the state from near to cities to very rural sites.
>We have up scale roadside stands and we have under a tree direct sales.
>Each of these might have different impacts.
>We had one market open last year in the town of Jacksonville. The farmers
>there took WIC produce vouchers. Over the summer they got $10,000 worth of
>these vouchers and estimated them to be 25% of the business so we can
>estimate market income to the 6-8 growers as approximately $40,000. Now we
>will have to explore further the buying habits of those marketers so as to
>be able to estimate the social value of the market.
>John M. O'Sullivan
>Farm Management & Marketing Specialist
>Southern Region SARE PDP Management Team Member
>North Carolina A&T State University
>P.O. Box 21928
>Greensboro NC 27455
>tel (336) 334-7957
>fax (336) 334-7207
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Best Wishes,

Douglas B. Johnson

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