The theory of economic development known as “import substitution” argues that substituting locally produced goods and services for those purchased from the outside (whether outside the country, outside the state or outside the metropolitan region) stimulates growth of the local economy. For example, burning American-produced natural gas in buses instead of diesel fuel refined from imported oil creates income in the United States for gas drillers, pipeline operators, manufacturers serving the gas industry and owners of mineral rights.
Another example closer to home: Consuming fruits, vegetables and other locally raised farm products creates jobs for farmers, who spend their money locally, rather than jobs for farmers in, say, California or Mexico, who don’t.
Carry that thinking one step further. In the Strong Towns blog, a reader from Maine recently wrote blogger Charles Marohn, wondering why economists tout new car sales as a sign of a strong economy. There are no auto assembly plants, and very few auto parts plants in Maine. The Pine State has an estimated one million registered motor vehicles, which cost $9,000 per year to operate on average — a $9 billion industry. But…
As I see it, every new car sold in Maine is, in effect, an imported car, and probably 85% of the sale price for each new car is almost immediately drained out [of] Maine’s economy. How can this be good for the local economy?
Maine also has no oil wells, no oil refineries, no tire manufacturing plants, no battery manufacturing plants, etc. Therefore, most of the money spent on these products also leaves the state in a matter of days. How can this be good for the local economy?
The same logic applies to Virginia. Although the Old Dominion does have a Volvo truck-assembly facility in Pulaski County, a number of auto parts manufacturers and a major automobile insurer (GEICO), the vast majority of money spent on the purchase, operation and maintenance of automobiles flows out of the state.
In a free country, that is as it should be. The last thing that state legislatures need to do is restrict free trade. But there are ways to promote the local alternative without imposing restrictions. Just as the local food movement champions consumption of locally grown foodstuffs, a local move movement could champion alternatives to the automobile — walking, cycling and mass transit foremost among them. Arlington County touts the “car free” lifestyle. More realistically, households might aspire to a “single car” lifestyle. In either case, spending less money on automobiles allows more spending on housing, restaurants, entertainment and other goods and services with more local value-added.
Is that a viable argument for creating walkable, bikable, transit-friendly communities? Maybe it’s a stretch. According to the economic law of “comparative advantage,” every country (state, region) should produce and export those goods and services in which it holds a comparative advantage and import the rest. Does that logic apply to transportation infrastructure as well? I’m just thinking out loud. I’m open to countervailing arguments.
— JAB
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