Effect of Shopping Malls on Local Economy

Shopping Mall

The American economy was the biggest political topic during the 2012 presidential election. Americans are worried because unemployment rates are high throughout the country, and President Obama has also cut spending to some key sectors such as the military. There is much that is causing the recession that is unrelated to domestic policy, such as what is going in Europe with the debt crisis. However, there are some important domestic factors that need to be taken into consideration when improving the economy. For instance, some parts of the United States have become dependent on the military and on big box retailers for local economies. However, there is a better way to improve the economy than to rely on big box retailers and single employers like the military. That better way is by developing local businesses. Local businesses have been shown to re-invest in their local economies (through increased employment as well as investment) by as much as three to four times as much as a big box counterpart (Lee). Local businesses help to reduce unemployment rates, which is an important factor in stimulating economic growth. In Cincinnati-Middletown, "unemployment rates…peaked higher than state and national averages," (Livingston). Compared with the rest of Ohio at 10.6% unemployment, the Cincinnati-Middletown region had 10.8% unemployment. According to the United States Bureau of Labor Statistics, the United States as a whole had 10.1% unemployment during that same period (Livingston). Before the recession, Cincinnati area unemployment was just 5.5%. Interestingly, companies in Cincinnati that sell their products abroad are doing well. This is because the American dollar is low vs. other currencies. American goods are therefore relatively cheap to buy on the foreign markets. Therefore, one of the key solutions to America's economic problems will be to stimulate local economic growth through farmer's markets, local restaurants, and shopping malls that house local businesses.

Farmers markets offer an important way of stimulating local economies by promoting local businesses and reducing dependence on big-box retailers. In Colorado, the Greeley Farmers Market celebrated its twentieth anniversary of operations. The birthday celebrations represent a significant change in the way consumers purchase their edible goods in Greeley. A farmer's market provides an "outlet for smaller producers to market their wares and food to an ever-increasing population of people who are willing to make an extra trip to buy outside the grocery store box," ("Farmers market important to local economy, producers"). As a result of the farmer's market, money stays more firmly in the local economy, rather than being thrown out to middlemen or worse, to companies that outsource. Moreover, farmer's markets have an important role to play in stimulating quality of life as well as local economies. The quality of life in Greeley has improved due to the farmer's market. The people who attend the farmer's market enjoy entertainment, socialization, and interaction with neighbors. They also have access to produce that is fresher than it would be if it were stocked on big box store shelves. The farmer's market also offers consumers greater variety than they might receive in one of the mainstream supermarkets in Greeley. One shopper is quoted as saying, "it also provides a place where people can sell anything, from coffee to crafts, bread to burritos, meat to marmalade and much more," ("Farmers market important to local economy, producers"). The farmer's market model is also better for the local and regional environment because it reduces the amount of trucks and other forms of transport are used when marketing produce in the more traditional ways. According to the United States Department of Agriculture, there are currently almost 8000 (7,863 to be exact) farmer's markets in operation throughout the United States; on the other hand, in 1994, there were only 1,744 farmers markets operating in the United States ("Farmers market important to local economy, producers"). Farmers markets have grown in size attracting an increasing number and variety of local businesses.

Local and domestic tourism provides another very important way of stimulating the economy. In New Hanover County, for example, tourism is the big money draw. In 2011, tourism spending "jumped more than 6% to more than $425 million," which is near what it was before the economic recession began (Foss). Tourism dollar spending has increased steadily for the past few years in New Hanover County. Most of the tourism is from domestic travelers. Tourism is proving beneficial to the local New Hanover County economy. This is true for employment rates and long-term benefits, as well as local restaurant, bar, shop, and hotel revenues that offer short-term benefits too. "In 2011, the county's tourism industry helped pay 5,100 workers nearly $95 million, and 100 new industry jobs were created," (Foss). The domestic tourism trend is a regional phenomenon too, revealing a growth pattern that is connected and pervasive. In other words, a family visiting New Hanover County might also be visiting Guilford, Buncombe. Mecklenburg, Wake, Dare, and Forsyth counties in the same trip because of geographic proximity. The net benefits of domestic tourism can be felt throughout an entire region or state. This is somewhat dependent on the price of gas. When gas prices are reasonable, then tourists are more willing to drive around more within the region they are visiting. When gas prices are high, it would possibly mean that tourism numbers and therefore revenues drop within that area. Heilman, for example, points out that gas prices have an effect on tourism.

Another way of stimulating the local economy is by promoting local Christmas shopping instead of online Christmas shopping. Local retailers rely on the seasonal shopping patterns each year. "Retail sales for Christmas are critically important in the annual economic performance of individual businesses, their employees, and via sales taxes, in the financial health of municipalities," ("Local shopping spurs economy"). One reason for the benefit of seasonal shopping is the tax revenue it generates for the states that collect income tax, such as Mississippi. Another reason is that shopping during Christmas injects much-needed cash into the local economies. Christmas shopping is certainly important to the local economies around the country. " The Gallup survey conducted Nov. 3-6 found Americans said they would spend an average of $764 on gifts this season, a 7% increase over 2010," ("Local shopping spurs economy"). Numbers clearly show the benefit of shopping local and supporting local businesses instead of major chains. "The amount of revenue returned to the local community by locally-owned, independent businesses showed that 52% of all revenues went back into their communities compared to about 14% for national chain stores," (Lee). This is especially true for local restaurants. Lee points out, "local eateries returned nearly 79% of revenues compared to just over 30% for national restaurants." Shopping local has a huge impact on stimulating the local economy. It might be the most important things Americans can do. Real estate appraisers can help local economies promote small business growth via the implementation of more local shopping malls housing local and small businesses. "The demand and supply factors that can affect the value of a subject property located within the boundaries of a local economic area," (Rabianski). Rather than buy goods online on Amazon.com or another major retailer, the money can go to local businesses. Moreover, it is important for consumers to be patrons of small independent stores in their communities. Shopping at Wal*Mart and other big box stores is detrimental to the local economy, because the owners of those companies do not really funnel back the money in the same way. Minimum wage jobs are not going to stimulate the economy in the way that small business growth can stimulate the local economy. Lee points out that "a new economic study that shows spending money at local businesses can have a bigger impact on the local economy than spending at national chains." In Salt Lake City, Utah, a study showed that "overall, locally-owned, independent businesses return 382% more dollars to the…economy than chain retailers," (Lee). However, many local retailers are starting to offer their customers in the city or even outside the state an opportunity to buy their goods online. This will help the local economy, but in more indirect ways. A third reason why the Christmas season is important to the local economy is employment rates improve. For companies that sell wares online, they will need more staff to help fill orders. This is good for the local economy. Similarly, businesses selling their goods online will need to hire local web developers and graphic designers to help them. This is also good for the local economy. One drawback is that there are poorly established tax codes in some states. Some states are not generating the tax revenues they could be generating by levying fees on online shopping experiences. "Internet sales, which usually do not contribute to local employment, sales tax revenue or profitability are becoming a serious factor in planning for local businesses," ("Local shopping spurs economy"). Yet in spite of the increasing number of consumers who prefer to shop online and avoid long lines, the state is still enjoying a spike in sales tax revenues ("Local shopping spurs economy"). This means that everyone wins when local businesses do well.

My opinion is that growth is promising in many regions of the country. One of those regions is Colorado. In Colorado Springs, the local economy is doing quite well in spite of the housing market downturn. "The Colorado Springs economy will grow between 2 and 3% this year amid an improving national job market, a growing national manufacturing sector," (Heilman). One of the local concerns in Colorado Springs is that the local economy is very much dependent on the military for its jobs sector. President Obama has been cutting military expenditures and will continue to do so, which is some concern for local residents. There is not yet evidence that the military cuts will affect this specific community in Colorado Springs. However, it is highly likely that the local residents in Colorado Springs will need to find other things to invest into in their local economies. Many troops are returning from their stations in Afghanistan, for example, and might need to find new entrepreneurial ways of making money and stimulating the local economy. I also believe that there is much that local economies cannot do anything about, such as international matters. For example, Heilman notes, "European debt problems could trigger a global recession." The United States economy might certainly be doing better than the fear-mongers believe. "National employment figures are improving, industrial production is looking better and…the number of housing permits is getting back to a more normal level," (cited by Heilman). Much of the blame lies abroad, and there is not much that Americans can do about what is happening in Europe. "Worsening debt problems in Greece, Spain and Italy are the biggest challenge facing the world economy and financial markets during the next year and are unlikely to be resolved quickly or without pain," (Heilman). Other international issues that are directly impacting the American economy include China. China has a housing market bubble to contend with. The country also has an export-driven economy, which could see major downturns as European spending power has weakened due to their recessions. Unfortunately, the problem is deeper than just being able to sell some goods abroad. As Livingston notes, "Stability in Europe over the sovereign debt crisis is one of the most important factors that will affect the economy next year. The ongoing crisis in Europe is also indirectly related to the housing market." The situation is complicated, but basically, banks are unwilling to lend money because they do not know what their capital requirements are, and are also uncertain of whether there will be a new international capital requirement. The term capital requirement simply refers to the stores of money a bank has in order to lend money. A larger store means it can lend more. Currently, banks are being thrifty and this means that fewer people in Europe as well as the United States can borrow for homes or business investments. One serious domestic economic problem is debt. Banks might start calling in their loans, which could prove disastrous for many Americans. "U.S. housing foreclosures likely will surge this year as lenders catch up on a backlog of defaulted loans delayed due to procedural issues," (Heilman). In fact, almost all areas of the American economy are showing signs of improvement except for real estate and related debt areas. Other debt areas include healthcare, as future Social Security and Medicare benefits will be putting the country in debt. However, there is measurable, "continuing private-sector job growth and investment in innovation," notes Heilman. Innovation is particularly important in stimulating the American economy because it means taking new products to market and stimulating consumer desire to spend. Moreover, Heilman points to a stabilized banking sector and a booming energy industry, which are helping the American economy to improve when it needs improvement the most.