In the midst of the Great Depression II, it’s natural for all of us to respond by moving to buy and sell products at the lowest possible price. However, I’m pretty sure we’d be better off to focus on buying and selling products where the greatest percentage of work was done within our own community — even though the price of those products is higher.

The official prescription: discounting

If you listen or read a bit about it, you will have heard that discounting is the best defense for a small business in the down economy. I was on a radio show with a restaurant association spokesman from the Bay Area, and his line was solid: restaurants will get by fine even with the market’s reducing spending, as long as they emphasize happy hours with free or cheap appetizers, early-bird and late-night dining deals, and other promotions.

Locally, you can read in the paper or on message boards that this is a great time for restaurant patrons because of all the low-price deals suddenly available. Restaurant Week, which is coming up in a couple weeks, is a variation of this approach that’s been used locally for a few years to address traditionally slow times of the year.

Looking at this closely, though, I’m pretty sure that there aren’t a lot of real deals, and that in the end, widespread discounting in the industry makes things worse for everyone. The alternative approach, of relocalizing our economy, while much more difficult to coordinate, actually holds out hope for success and building real community wealth.

The mechanics of discounting

What I say here does not apply to all restaurants. Every restaurant is different and has a different financial structure. However, I’m confident that the market is efficient enough that this analysis applies to most dollars spent in restaurants, and the macro effects of discounting hold true across the community.

The problem with discounting is that most restaurants generally operate on exceptionally thin margins. This is because, in the last 50 years, we’ve developed the idea that food is a commodity, so most people’s food purchases are price-driven, and in general little attention is paid to the difference in quality of raw ingredients. Restaurants operate in a very competitive environment and have pared their margins to be as small as possible.

Simply put: because the industry is so competitive, restaurant operations and margins have already been optimized. So, on the average, industrywide discounting means that the industry must sell cheaper products — products which are both lower quality and which most effectively externalize their costs.

It’s common sense that using cheaper ingredients is likely to mean using lower quality ingredients. But just as notably, in our bizarre global economy of container ships, it is almost certain to mean using ingredients from much farther away.

Far-flung ingredients externalize their costs, through subsidized fuel, unchecked environmental impact, low regulation, and low labor costs in poor areas. It is a hell of a lot cheaper to send pond-farmed melamine-ridden fish from China to California than it is to catch wild fish responsibly off the coast of San Diego.

Which means the the dollar that our restaurants pay for “discount” fish leaves our community for overseas, and doesn’t return unless we make something in San Diego that we can sell to China or Thailand or wherever. Which, more or less, we don’t, and even then, we’re out the cost of transportation both ways.

The five dollars we pay for “expensive” fish goes partly to the local fishers and deckhands, partly to Tommy down at the fish receiver house, partly to the fisheries management people, maybe even partly to the folks at Coastkeeper who keep an activist eye on the whole thing. All of whom spend their money again in our community.

In other words, that cheap fish costs our community the whole price of the fish. The expensive fish costs us darn near nothing. In fact, responsibly catching and eating that local wild fish makes us richer.

All containers are created equal

The logic of restaurant discounting applies just as aptly to big box retailers and other efforts to adapt to the global economy by procuring ever cheaper goods.

Specifically, in the global economy, where most things are commodities and price trumps all, almost all operations are already optimized in terms of price. So, just like in restaurants, following the logic of lower prices leads us to lower quality goods and to goods which can externalize more of their costs.

When industries move overseas, or our communities go out of the business of making certain things, or growing our own food, this means that we’ve found places farther away that can externalize the costs of those goods better than we can. The logic of “cheap” tells us its better to stop making these things ourselves, and buy them more cheaply from people we don’t know.

A dollar spent locally is a dollar earned

What does it mean that the economy is down? It means that our system of making as much stuff as possible, stuffing it into containers, and shipping it all over the world, has hit a snag. All the people on Earth, it turns out, recently made way more stuff than anyone wanted to buy. And by the time we figured it out, we have a backlog of stuff that could last years, maybe even a decade.

So there’s not a lot work for people to do right now.

Or, that’s true as long as the only possible idea of “work” is to make a lot of stuff that can be sold all over the planet. That idea of work, however, is less than a hundred years old. There’s an older idea of work which offers a golden opportunity to live in an “up” economy.

Specifically, we could return to the idea of work as applying human hands and human thought to grow and make stuff for our neighbors, in order to enrich our community. To live in this economy would require only one change from our current paradigm: to embrace the idea that people’s intentions have intrinsic value, which informs the value of the products they make.

In the relocalized economy, we no longer buy and sell commodities, since the unique human intentions embedded in any good imbue it with a unique value. Of course, in this economy where intentions matter, goods will ultimately rise to a high quality, as the products which people care most about will dominate the market.

In this localalized market without commodities, prices are higher, but more money stays in the community, so the community is wealthier. More importantly, everyone in the community lives a life that to us now seems luxurious — where the goods we use day-to-day are handcrafted and of the highest quality. Right now, it seems only the very rich can live like that, and yet a few generations ago, when we were mathematically poorer, that way of living was commonplace.

Most exciting of all, our communities and regions will develop a real sense of place. Since the fabric our lives will be woven by the real people who live near us, with their individual strengths and weaknesses and characters, no community will be quite like any other. The real feeling of travel can return even when you take a short trip to another community. Being from a certain place, living in a certain place, will mean something in a way it hasn’t for us in decades.

The container economy is either failing for good or in a serious readjustment phase. Places that continue to play by the rules of the container will be brought down to the lowest common denominator, whether that means eating melamine shrimp from abroad or, you know, driving out to low-wage jobs at big box retailers. This is inevitable because the wealth of the community will be spread worldwide, while nothing of real value gets returned.

On the other hand, places that relocalize will thrive even in a recession, as they develop their own good paying jobs, and enjoy a high quality of life with the “luxuries” of handcrafted goods. Less and less of their community’s wealth will leave, and in fact it will grow as we need less and less from elsewhere.

The good news: it’s happening

Another way to look at the global sales slump is that perhaps a whole bunch of people — due to expensive gas, falling home prices, tightened credit, whatever — decided to stop buying cheap stuff and stuff we don’t need. I think to some extent it feels like a relief.

This tiny renunciation of container goods may be hurting a lot of us, but if as a result we’re wasting a whole lot less human effort and a whole lot fewer natural resources, it’s got to be a good thing for our species and society.

And I think there’s reason to think this is what’s going on. I saw a newspaper article about the Christmas sales slump documenting that, while national retailers on the container economy are way down, Etsy and craft shops are doing great. National food producers and grocery stores may be hurting, but farmers markets are growing.

While prominent international business are going to fold and that will make our (including the Linkery’s) financial prospects dimmer in the short term, we have an opportunity to apply our newly freed time, energy and space to growing, making, and selling the things we need and love.

In five years, perhaps there will be fewer San Diego jobs in engineering, finance, real estate, restaurants and hospitality. If we work together with focus, though, we can have a lot more jobs in farming, textiles, in harnessing energy, in building furniture, in making soap. (Our thriving brewing community strikes me as a great example of how this could happen.)

Our success in developing this community of local work will have a lot bigger effect on our real wealth than the price of gas, real estate values, or our exports. The thought that it could happen here, and we could live in such a community, is, to me, a joy that dwarfs the turbulence of the moment.