Plugging "leaks" in the Island economy

By Steve Myrick - September 13, 2007

On a recent weekend afternoon, two young women were returning from Woods Hole to Martha's Vineyard aboard the Steamship Authority ferry Island Home.

Spread out on the table before them, and tucked between their seats, were nine or 10 blue plastic bags stuffed with Wal-Mart merchandise.

Their purchases are an example of what economists Michael Shumer and Doug Hoffer call leakage. In August the two economists completed a unique study of the local economy for the Martha's Vineyard Commission, as part of a wide-ranging planning effort known as the Island Plan.

The 39-page report titled, "Leakage Analysis of the Martha's Vineyard Economy, increasing prosperity through greater self-reliance," identifies the parts of the economy where money is leaking off the Island and identifies areas where the leaks might be replaced with more locally produced goods and services.

Plugging these leaks, they say, means more than a simple dollar for dollar improvement in the Martha's Vineyard economy. Money that stays on the Island has a multiplier effect. It gets spent on other local goods and services, creating demand, leading to more and better jobs.

The study concludes that if year-round residents of the Vineyard shift 10 percent of their annual consumption to local businesses, they would generate $9 million more in earnings, $22 million more in annual output, $1 million more in tax revenue for Island towns, and 344 additional jobs.

The study identified 13 economic sectors where opportunities seem most plausible for shifting commerce to locally owned business.

Growing local food

Producing local electricity

Manufacturing local biofuels

Building affordable housing

Increasing overall demand during off-season

Creating cottage industry-scale manufacturing

Expanding local business, health, and financial services

Starting a telecommunications utility

Creating new institutions for local pension fund reinvestment

Stimulating more local procurement by government

Creating local purchasing pools

"In fact, these numbers substantially underestimate the potential for localization on the Vineyard," the study's authors write. "For some localization initiatives, such as creating a local telecommunications utility, a much greater shift than 10 percent would make sense. And the presence of more local goods and services would naturally shift the consumption patterns of the huge seasonal population as well."

While the study's conclusions fit a scientific analysis, no economist can measure barriers to some of the ideas, for reasons that have little to do with dollars and cents. Issues get complicated when politics, quality of life, a seasonal economy, development, and privacy issues collide with economic equations, experts say.

For example, like those two young women on the ferry, many want Wal-Mart selection, convenience, and prices. The question is, how many want Wal-Mart?

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