An economy is based on trade. We go to the marketplace, either in person or digitally, and buy the goods (cabbages, shoes, DVDs, meat) we need. We also enter the market place to purchase services such as healthcare and education.
This market place is where we purchase accommodation either through a rental agreement or a purchase and mortgage plan. There are other possible combinations such as cooperative housing but generally people either rent or buy for themselves and their family.
We pay for the purchase with either cash or credit. We earn the cash by exchanging our labour in one of the enterprises in the market place for it.
Now, if we pause to give some careful consideration as to where we shop, by that I mean at which enterprises we make our purchases, we can make some choices and it is those choices that assist us to build local economies.
The demand for locally produced goods such as witnessed in the local food movements, when combined with rising transportation costs and environmental concerns, encourages the movement of the production facility closer to the marketplace.
Money spent in the local economy recirculates and is spent again, enriching a community with another cycle of buying and selling. This is the “multiplier effect.”
This process is referred to as relocalizing the economy. A relocalized economy may involve: reduced consumption, locally produced energy and goods, living wages, and environmental restoration.
The consumer's choices you make can shorten the distance between producers and consumers and make the connections between the two more direct. This local economic activity becomes a benefit to the local community.
I have been reading an excellent book by Vandana Shiva, Soil Not Oil: Environmental Justice in an Age of Climate Crisis (South End Press, 2008), the following quote points out a way that we can grow strong local economies.
"As the fossil fuel economy has grown, it has substituted energy for humans. On the one hand, this has rendered humans redundant to the economic enterprise of production. It has created the crisis of poverty and unemployment, of dispensability and disposability. On the other hand, it has led to the problem of carbon pollution. Whereas humans are sustained by renewable carbon embodied in plants and biomass, industrial energy consumes fossil fuel, adding more CO2 to the atmosphere than the planet can recycle.