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Posted on Sun, Dec 23, 2012 : 4:28 p.m.

Why we can't just shop our way to a better, more local economy

By Ingrid Ault

This recent TEDx talk by Stacy Mitchell, senior researcher at the Institute for Local Self-Reliance, was an influential discussion and one that I think is worth sharing as part of Washtenaw County’s “Think Local First” movement.

Here is my paraphrasing of her discussion, showing the key points Mitchell makes:

In 1773 citizens engaged in an act of corporate sabotage during the Boston Tea Party. Parliament passed the Tea Act, giving the British East India company an exemption to sell tea without paying tax. The purpose was to undercut local tea merchants and take their business, so the community revolted.

What ignited the Boston Tea Party was not so much a tax, but a corporate tax loophole.

Over the last 20 years, a handful of businesses have taken control of large swaths of the economy in much the same way. Walmart was a small player just 15 years ago, now it takes $1 of every $4 spent on food. And the future of retail looks even more concentrated: One third of everything we buy online is purchased from a single company.

Many people are beginning to question the wisdom of this and are changing the way they shop. But a purely consumer-based response is not likely to get us where we need to go because it doesn’t fully recognize how it got us where we are today.

For a long time the story that drove big business is “Bigger is Better.” It’s more efficient, more productive, and it out-performs. But this idea suffered a serious blow when we learned big banks are neither safer nor even more efficient than smaller ones. According to economists, banks reach their peak of efficiency when they are the size of a small institution. Beyond that they become top heavy with bureaucracy, explaining why you pay more fees than when you bank at a small bank or credit union.

And it's not just banking. In sector after sector you begin to see that consolidation is not serving our interests very well. Small farms produce nearly twice as much food per acre as big farms, with far less environmental impact. And the bargain that big box retail once seemed turns out to cost us far more than just lost income. This model has almost single-handedly diminished the middle class. Manufacturing and small businesses have shrunk. In exchange, the jobs supplied are so low-paying that many employees rely on food stamps.

So if they aren’t out-performing, how is it that these giant companies have become so dominant? The answer is much like the British East India Company: They have used their market power and policies to influence and rig the game.

There is nothing inevitable about the current structure of our economy as it is not the product of natural evolution. It’s the logical outcome of a set of policies.

This is one of those moments where you can affect change. We could begin by campaigning for turning the farm bill on its head and, instead of giving the most money to big farmers, divert it to local farmers feeding their neighbors. Or we could close all of those loopholes that give big businesses an advantage when paying their taxes. Or maybe we re-examine antitrust laws that have been on hiatus for 30 years and ask whether it's in our best interest to have one company control one third of e-commerce?

Some of the answers are right here, and largely there is citizen support for them. The issue that we have to grapple with is seeing our trips to the farmers market and the local bookstore not as the answer, but as a first step. Now is the time to turn this into a political movement.

Ingrid Ault is director of Think Local First in Washtenaw County.

Comments

Tru2Blu76

Fri, Dec 28, 2012 : 9 a.m.

What we don't know CAN hurt us. Take for example the little-known fact that fruit imported from Chile and other "points South" take more energy to deliver to us than the food energy they contain. Buying out of season fruits depends on availability and there's always some corporation willing to respond to the "Market." Of course, if there were no market for strawberries in January, they wouldn't be shipped from thousands of miles away where the growing season is still going. I see a feedback loop wherein the companies respond to customer desires and customer desires drive seller response. Big grocery chains compete on the basis of "customer satisfaction" but customer satisfaction has become irrationally exaggerated and that's ENCOURAGED by companies competing for customers. I also think that the attitude which says "government is bad so paying taxes is supporting bad government." is sinister, manipulative and syllogistic - but many people swear by that "ideal." Daring to use "the R word" - It appears the best overall solution is for every adult to adopt Rationality as a prime value and duty. (oh, but there goes our enjoyment of strawberry short cake in January - we can't have that!)

Lloyd Payer

Wed, Dec 26, 2012 : 6:19 p.m.

I will not buy michigan products until you get rid f tax tax tax snyder michigan business do not wan to pay taxes but they want to tax retires so i will take my business to ohio good luck michigan

FredMax

Wed, Dec 26, 2012 : 2:46 a.m.

"So if they aren't out-performing, how is it that these giant companies have become so dominant?" I dont argue any assertion of hidden costs, e.g. "with far less environmental impact". However, if small is really "out-performing" big, e.g. "Small farms produce nearly twice..." , then why aren't small businesses selling small farm products for cheaper than that of their large counterpart?

snapshot

Mon, Dec 24, 2012 : 5:38 p.m.

Let's get the history right....while the East India Tea Company was the first recorded "taxpayer bailout", the Stamp Tax was a result of the British footing the bill for the French and Indian War that George Washington started by killing a French officer while on a surveying trip to steal French lands. In addition, the normal tax on tea was not being paid because colonists like John Hancock and many others engaged in organized smuggling of the tea to avoid paying the required taxes. Next, it is wonderous that these folks that dimonize corporate America are feeding at the public trough of public employment where they produce no income but are supported by the tax dollars that these corporations pay through actually producing income. What a crock.

JJ

Mon, Dec 24, 2012 : 3:29 p.m.

The sooner America wakes up and starts supporting American based companys the better we will all be doing. If you really pay close attention to the car business as an example... our domestic American companies / manufactures are tough and resilient and are doing great with the quality of product. I'm sure most are aware of the major debacle that Toyota has gone thru recently. Several major recalls and a huge penalty for withholding of reporting defect related information in a timely fashion. And Hyundai... Also experiencing numbers cost of late... Even a couple report it just today. NHTSA Campaign ID Number : 12V568 Manufacturer : Hyundai-Kia America Technical Center Inc Make / Model Years : HYUNDAI / 2012 Subject : Sunroof may Shatter due to Installation Error NHTSA Campaign ID Number : 12V567 Manufacturer : Hyundai-Kia America Technical Center Inc Make / Model Years : HYUNDAI / 2012 Subject : Parking Brake Components may Bind Yet it is amazing to see towns like Ann Arbor where the majority of cars being driven around by the educated and smart people who live there are mostly imports. There was a show on 60 Minutes or something of that nature that indicated how if everybody would just buy x% more American product versus imported from China we would be so much better off in terms of domestic manufacturing and jobs. Straight up simple math but of course where does who will take this down a complicated road to rationalize other approaches.

snapshot

Mon, Dec 24, 2012 : 11:23 p.m.

JJ American cars are crap, have always been crap, will always be crap.......because unions allow drinking, sleeping, poor quality, and lack of loyalty on the job to go without consequence. Get a clue and until you do the only folks buying Americand are the employees getting a deal at the taxpayers expense....Ford excluded....at least they are pulling their own weight in the process of wasted labor.

Vivienne Armentrout

Mon, Dec 24, 2012 : 3:15 p.m.

The video is worth watching and the summary doesn't do it justice. But the information belies its conclusion (and headline). Consumer behavior is indeed our most potent tool for changing our economy. (Think Local First should be all about this.) Political change (for which no prescriptions are offered) is a nearly impossible method for changing our economy since politicians respond to the powerful institutions like big corporations and cries for justice are mostly ignored. By changing our behavior and simply refusing to comply with corporatism, we can create a wave. I've been boycotting Walmart for a decade and look what has happened to them. (Yes, the last part of the sentence is a joke.) There is much thinking and writing about the benefits of localized economies. The classic is E.F. Schumacher, "Small is Beautiful" http://en.wikipedia.org/wiki/Small_Is_Beautiful An excellent source of wide-ranging essays on localization is contained in the Localization Reader http://thelocalizationreader.blogspot.com/ by UM professors Raymond De Young and Thomas Princen. Somewhat different but to a general point is Nassim Nicholas Taleb's article today in the New York Times http://www.nytimes.com/2012/12/24/opinion/stabilization-wont-save-us.html?_r=0 about the fragility of centralization. It speaks obliquely to the reasons that local economies are more secure, while large centralized ones can fail disastrously when they fail.

Technojunkie

Mon, Dec 24, 2012 : 2:33 p.m.

The problem is that we have corporatism, not capitalism. Big companies direct government intervention via regulatory capture and campaign contributions. If you got rid of farm subsidies, USDA and FDA then small farmers would become much more competitive. Though even then there's no guarantee that a state level bureaucracy won't do Big Ag's bidding and crush the little guy, as the DNR did to several small hog farmers this year. Still, getting government out of the way and buying from the most transparent local businesses using your own judgement is the best way to go. Get over the illusion that Big Brother is looking out for you. Beware the corner-cutting that Big Ag gets away with. There are very good reasons why industrial food appears to be so inexpensive. Read Joel Salatin's "Folks, this ain't normal" for more on this.

Soulful Adrenaline

Mon, Dec 24, 2012 : 1:16 p.m.

I'd easily buy more local if the price is right. $7.00 for a bag of Ann Arbor Tortilla Factory chips and $10 for a thing of pickles from the Brinery, come on! Sometimes this local thing seems a little too smug to me. Local is good but practicality is better. Show me inexpensive local and I'll show you some coin.

E Claire

Wed, Dec 26, 2012 : 9:25 p.m.

Your comment nails it; most of us can't afford to buy local at AA prices.

DonBee

Mon, Dec 24, 2012 : 1:13 p.m.

In some industries, scale is required to deal with the capital and technical costs of producing a product. Boeing with aircraft, Newport News with ships, etc. In some industries a red wagon and a few tools are all you need - very local market garden. In the 1950s most of our companies were able to offer pensions and other benefits that had never been offered before, by the year 2000, with global competition, pensions were a luxury that most companies could not afford - even in Europe pensions are a huge issue (yes, even in Sweden). Local companies have to be able to compete to survive - a better idea, a lower cost, better service, a better product or a brand that people adore. There is a minimum size in each industry to be successful. Ask the Busch family why they have several stores, you will get an interesting answer that is well thought out. Ask the car dealers who have several lots and you will likewise get interesting answers. Too small and there is no ability to gather enough savings to weather downturns, put money away for retirement or pay reasonable wages.

EyeHeartA2

Mon, Dec 24, 2012 : 2:51 a.m.

@dancingmysoul: "GM has been cutting the pensions of its retired workers, while raising the cost of health insurance and limiting coverage for years." Please describe the pension plan of small farmers employees? or The shops at Kerrytown's employees? or Marks Carts employees? or Hey, how about everyone's darling, Zingermans? Now compare that to the big mean corporations like GM you are railing on.

walker101

Mon, Dec 24, 2012 : 2:39 a.m.

Sounds too much like our Federal government.

Dog Guy

Mon, Dec 24, 2012 : 12:47 a.m.

If enough people in Ann Arbor "ask whether it's in our best interest to have one company control one third of e-commerce," maybe some will start a local allencreek.com or mallettscreek.com and deliver us all our stuff by bicycle. Do not use huron.com as that would be insensitive.

Greg

Sun, Dec 23, 2012 : 11:13 p.m.

How about a truly radical idea. A straight tax across the board, would not matter what you make, everyone pays. No more people who tell you "they don't know where the money they get from govt comes from" as they would have to contribute some. Everyone would contribute - radical idea indeed. No more tax holes, loops and mystery interpretations of the tax code. Would make far too much sense to ever get passed by our two bought and paid for parties who run things.

eagleman

Sun, Dec 23, 2012 : 10:50 p.m.

Ingrid has apparently forgotten that big businesses like Ford, GM, and Chrysler, employ hundreds of thousands of people by themselves.Then there are the tens of thousands of others employed by businesses that support these institutions. The notion that small and medium businesses will be able to enlarge our economy by themselves is asinine. Firstly, not all business men and women are created equal. Stupid ideas, inept management, poor financial planning, bad locationā€¦there are a variety of factors that lead to 90% of all businesses failing within their first five years. Ingrid wants to sell you a bill of goods that the big bad corporations are the ruin of small and medium-seized businesses. For certain businesses they are, but then those businesses were not employing very many people in the first place. They also were not playing anymore than what a WalMart does either. Ms. Ault is correct in that we must prevent these institutions from crushing competition by unethical means. We must resist monopolies and all the evils that come with that However, we must also resist the urge to demonize corporations for simply doing business. Millions are dependent on the wages that companies like WalMart pay Millions more--unaccounted for by Ms. Ault--count on the low prices a WalMart offers. Ms. Ault seems not to care a hoot about these folks, who by the way, greatly outnumber WalMart workers. She seems to think that they should pay more for the same or less. I worked in a retail store. These type of jobs require no skill. That is why they are low paid. You also know going into it that you are low paid. There is no dishonesty about what you are getting into when you apply to work at a retail store. Truth be told, the workers in retail are treated FAR worse by the "guests" than by the companies themselves. This so-called guests verbally --and occasionally physically---abuse these workers ,demanding like a 5 year-old that they get their way.

Cameron Anderson

Mon, Dec 24, 2012 : 5:50 a.m.

Eagleman, your argument is not coherent. What is the point of a huge multinational corporation? You say they employ many people, which by definition is true, but the entire concept of such an entity is to employ as few people as possible. That's what vertical and horizontal integration are all about, cutting out "superfluous" workers. But those workers aren't superfluous at all. Those are the jobs necessary to allow competition and innovation to flourish. Are you apposed to competition and innovation? You seem to fetishize the corporate elite, but they have consistently proven to be profoundly incompetent. Just look at General Motors, Enron, Bear Stearns, etc. There's no secret that makes multinational corporations immune from human error. They have proven to be just as prone to mismanagement and myopia as any small or medium business enterprise. You're beloved huge corporations have given us the Great Depression and the Great Recession. I see no defense for their perpetuation at all. The most productive years in terms of improved quality of life and standard of living occurred in their conspicuous absence. You say that "most people can't run a business" but we don't need *most* people to run a business. What I'm suggesting is that one or two out of every 10,000 people, or slightly less, can run a business or should at least be afforded the opportunity. That is still a tiny minority, yet would preclude the development of monopoly power in any industry that operates on the national scale. I'm not advocating some agrarian society or anything like that. I'm merely making what should be an uncontroversial assertion: that monopolization is bad for everyone except the monopolist and therefore should not be tolerated. The original Boston Tea Partiers knew this. Why don't you?

dancinginmysoul

Mon, Dec 24, 2012 : 1:53 a.m.

They use a sick day because they need a friggin day off. That does not make them a bad employee. You think the people in charge don't play hookie? I see your attempt to call me out with your comment on Unions. I come from a strong Union family and my husband has been in a Union for as long as I've known him, which is half my life. My Grandfathet and two Uncles spent their lives in the factories in Flint. My Zhrandpa retired and my Uncles were put out of work when the plant closed. Take your hyperbolic rhetoric elsewhere. I will continue to make my decisions based on reasoning and evidence.

eagleman

Mon, Dec 24, 2012 : 1:28 a.m.

Dancingmysoul, people generally treat other people like garbage. Have you tread the news today, ole boy? Yes, it is true businesses often do not treat their employees well, but employees are no better. There was an article that noted that 47% of US workers will use a sick day to pay hooky. Unions generally treat their businesses like garbage by protecting the lazy and the thieves, and generally making it harder for a business to be run. I belong to an union. I see it. How about you? 12 hour days are not that common in retail. If worked, they are done so voluntarily to make more money. That is a choice made by the worker. GM almost went out of business. Did you expect them to sacrifice the company for the sake of pensions?? Do you not understand that the death of the company means the end of pensions, jobs, and yes, unions? You would be remiss in failing to note that Flint grew BECAUSE OF GM. Why is it that you note GM's role in its decline, but not it's rise? The bonuses you speak of, while often undeserved, are a minsicule portion of the money a corporation has to spend. They also are for people who are infinitely more important than the worker for their actions impact EVERYONE at a company, while the worker actions impact a tiny portion. Complaining about CEO bonuses is a crude tactic used by demagogues to rile up the ignorant. If one cut out completely these bonuses the impact felt would be negligible at best.

dancinginmysoul

Mon, Dec 24, 2012 : 1:01 a.m.

GM has been cutting the pensions of its retired workers, while raising the cost of health insurance and limiting coverage for years. And we would be remiss to exclude conversations regarding the impact GM has had on Flint. Meanwhile Executives and CEOs made out with millions of dollars in bonuses and outlandish salaries. I don't think anyone is condemning businesses for simply doing business. But you can do business and be successful without taking advantage of your employees, without treating them like garbage, and generally undervaluing what they do for the company. And businesses can treat their employees with integrity and respect. But these things are not the norm. Businesses- large and small, local and overseas- treat their employees like garbage. What's worse: getting yelled at by a customer, or only getting paid $7.55 an hour to get yelled at. And at the end of a 12 hour day of getting yelled at by customers, you still cant afford to feed your family.

eagleman

Mon, Dec 24, 2012 : 12:06 a.m.

Cameron, so what do you think of large centralized government? Democrats want more of something(government) that far outpaces monopolies in human rights violations. War, genocide, man-made famineā€¦centralized government has given us all this. Do you support a large and active government, Cameron? if you do, you desire something far worse than monopolies. This aspect of the Left is what I find odd. They rail against big corporations, but staunchly defend large, centralized, governments. Apparently, they have forgotten who wages the wars and commits the genocides. Apparently they have forgotten the horrors of the past. See, I don't see the benefits of basing our economy upon a multitude of small-to-medium sized businesses that charge more for less, that employ small amounts of people, that fail more often than they succeed. I don't see how such a structure works in a post-industrial, urbanized, land where most of the people lack the intelligence, work ethic, or both to run a successful business. Most people simply can't run a business successfully. The statistics bear this out. To put it succinctly, you want us to base our economy on something that does not work for a nation of 300 million. Cameron, you live in a world long past when most people were farmers who till only enough to eat and to sell at the market. This is no longer the base. Besides the enormous increase of population, there is the fact that people no longer have the work ethic or skills to be farmers. In your world Cameron, who employs the masses who don't have the ability to un their own business? Who? Walmart started out as a small company. It, through the efforts of Sam Walton, built itself into the behemoth that it is. Rather than lambasting it, perhaps you and the other malcontents would find a way to create a niche for yourself and build from there.

Cameron Anderson

Sun, Dec 23, 2012 : 11:37 p.m.

There's no need to "forget" that massive multinational corporations like GM, Ford, and Chrysler employ hundreds of thousands of people to propose that perhaps just 10 companies producing more than 70 percent of the worlds automobiles is not in our collective best interests. That's monopoly power, plain and simple, and if you concede that monopoly power is a bad thing I find it curious that you'd also defend monopolists in this fashion. You're right that there are bad business people out there, but isn't that all the more reason to limit the size of corporate entities? There's very little about corporate management that prevents ill equipped persons from reaching the height of the corporate power, so shouldn't we make sure that when those bad business persons do arrive at the time of an otherwise successful company their capacity for damage does not extend to the entire national or even global economy? The problem is that big corporations *are* the ruin of many small business as they work very hard to eliminate competition. Take the case of Walmart which uses its power as a single buyer to extort lower prices from suppliers. It is impossible for a local retailer to engage in price competition when Walmart exercises that kind of power. They stand no chance. And this is not good for workers as you imply. However "honest" the low wages are, the fact is that you could make more money if Walmart had real competition (not just monopolistic rivalries with the likes of Target) since they'd have to offer wages that were competitive with those offered by a variety of other retailers. If anyone is "depending" on the low prices offered by Walmart that is hardly an argument in favor of the Walmarts of the world. It is evidence of just how successfully they have impoverished so much of the population and made the dependent upon them. That is very, very bad indeed.

1bit

Sun, Dec 23, 2012 : 10:06 p.m.

Maybe the first step would be for people to actually pay their use tax on out-of-state or internet purchases. Or enact federal legislation requiring online retailers to collect the tax at point-of-sale. Closing tax loopholes are fine too. But not all "big businesses" are evil and not all local businesses are worth shopping at.