6 Jun 2005 bolsh   » (Master)

Multiplier effect

It's times like this I'd love to be able to doodle on webpages, but for the time being I'm stuck in Advogato with text only. Ah, well...

When you spend money, that money has a value to the economy which is more than what you spend. If you buy a shirt for $30, the shop owner uses that money to pay wages, buy groceries. So out of your $30 maybe $20 recirculates into the economy, and then that gets respent. Typically your $30 purchase is worth about $60 to the economy.

Imports are dead money. It's money that is getting taken out of the economy. When you buy an imported product in the supermarket, then a lot of what you pay is going to the importer, and from there going out of the country.

That's basic economics 101.

Now what happens when you buy computer software? Almost all of the computer software for sale worldwide is US produced, and has very high margins. That means when you spend $100 on Windows, $80 of that is probably going to leave the country. There is no multiplier feedback loop, where the money you spend goes towards improving your local economy, buying local products and generating local employment. It's dead money.

One of the things you get with free software is the freedom to choose your supplier. The sources are available, which means that a company supporting the product can sprout up anywhere. You don't need to go to the GNOME Foundation to get a GNOME desktop administered or supported, chances are there's some cocky college graduate living in your town who can do it for you, cheaper.

And this is where all the TCO arguments coming out of Redmond fall flat on their face. Let's say, for arguments sake, that installing and supporting GNOME is 20% more expensive overall for the first 5 years you use it. It's cheaper afterwards, but play along with me for a sec.

So when you spend $100M on Windows, $80M of that leaves the country. You get $20M working for the local economy. When you spend $120M supporting GNOME with local companies, $120M stays in the economy.

This isn't a question of percentage points, it's multiples we're talking about. $1 invested in free software by a government is an investment worth 5 or 6 times the equivalent investment in Windows.

You're spending more, but it's an investment in local industry, the local computer industry. It's an incentive for local graduates to stay in the country to earn a living, rather than moving to the US. It's a cheap way to kick-start your local knowledge economy.

When Jeff Waugh said we changed the rules, he's right. We've changed the way the world works. We've changed people's expectations. We've given people the freedom to choose.

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