Case for localized economy

So as I'm sure a few of you know, I like getting into discussions (sometimes heated) about political and social issues, sometimes ones that I don't know that much about. It's easy to get caught in a web of supposedly causal relationships, and the amount of information that we posess today makes just about anything believable. However, amoungst all this deliberation and discussion, one issue has continued to bother me. That is, how many countries/cities with so much to offer are still so paralyzed by poverty. What I have realized is that in the age of franchises and megastores, borderline economies are being stripped of their potential to grow. It is easy to blame companies like Wal*Mart for uderpaying their employees, but is that ultimately the issue? Maybe we should be considering where this saved money is going in the physical sense, not just to who.

Conservatives like to think that capitalist economics function best in a "trickle down" format; that is, more money for the rich will allow for more business ventures to be started and more products purchased, which in turn provide income for the lower-class citizens who make those products and will work for these new companies. Unfortunately, the trickle effect leaves the working class begging for leftovers like dogs at the dinner table.

Back to the point. Let's assume that the rich and poor generally inhabit the same areas (they don't). If this were to be true, perhaps the trickle down effect might actually work. IN fact, in the case of local start-up companies, it can. The sudden influx of money from a successful start-up can infuse a local economy with new life. This is because the management exists in the same space as the rest of the company. In other words, the money that is made stays WHERE it is made, and can trickle down. In the case of companies like Wal*Mart, those that make any real income are removed from the localities that support their business, and so this income is not reinvested back into the economy. This is where low wagescome into play. Consider the income that could be made by someone who owned their own restaurant, and then consider the drop in income if they were to work for McDonalds. His McDonalds location generates just as much profit as his restaurant, except it isn't distributed among the employees. Instead, the profit is made by satellite managers who live elsewhere and spend their money elsewhere, and so this lost income is not just lost for our entrepreneur, but for the community he lives in.

As much as this is a problem in the western world, it is even more so in the Third World. Countries that have valuable resources sell them at bare minimum prices to the developed world
, where they command high prices. Consider the case of coffee. This is a resource we charge enormous amounts for given the cost to the companies, and yet the vast majority of the profit stays here, instead of making its way back to the people who actually farmed the beans. At the very least, if Tim Hortons (for example) is to make so much money from coffee, they should at least distribute the income to the country from whence it came. If they set up a management office in Costa Rica, for example, and employed Costa Ricans at comparable salaries to work in these offices, the country would experience an influx of income because the people making money from the transaction would also be spending it in Costa Rica, allowing eventually for higher taxes and social programs like schooling, healthcare, etc. (obviously there are educational barriers to begin with, but the point is to encourage wages at the bottom end that are proportional to the end profit.