I recently gave a TEDx talk that looks at one of the more pressing challenges of our time: How do we wrest control of our economy back from giant corporations?
The statistics are stunning: Four big banks dominate our banking system. Agribusiness giants monopolize food production. Walmart captures $1 of every $4 Americans spend on groceries. One company, Amazon, accounts for over one-third of everything we buy online.
The good news is that many Americans are beginning to question the wisdom of letting a few companies run everything. They are changing where they shop, what they buy, and where they bank. And they are making a difference: Since 2004, the number of farmers markets has doubled. More than 1,000 neighborhood grocers have sprouted up. Nearly 500 new independent bookstores have opened. Long-vacant factory buildings are filling up with small-scale brewers and clothing makers. And over 600,000 people have moved from big banks to local banks and credit unions.
But -- and here's the bad news -- as remarkable as these trends are, they are unlikely to amount to more than an interesting side-note on the margins of the economy if the only way we confront corporate power is by trying to be better consumers.
Choosing independent businesses and local financial institutions is a great idea. But a purely consumer-oriented response won't get us where we need to go, in part because it fails to fully grapple with how we got here in the first place.
For a long time, the story of how big companies grew so dominant was, basically: bigger is better. It's more efficient, more productive, better performing. But, as I explain in the talk, when you pull back the curtain and really begin to look at the evidence, you find that, in one sector after another, the case for bigness doesn't stand up. Many of today's dominant companies do not in fact deliver better outcomes, higher productivity, or even, in some cases, lower prices.
How, then, have they taken over so much of the economy? The answer is that they've used their size and political influence to hijack government and rig public policy to their own advantage. From the farm bill to banking regulations to state tax codes, the rules favor big corporations and undermine smaller, more sustainable businesses.
And that's why the "buy local" and "eat local" and "bank local" movements need to get much more political. Unless we change the underlying policies that shape our economy, big corporation are going to continue to gain ground.
Stacy Mitchell is a senior researcher with the Institute for Local Self-Reliance, where she directs initiatives on independent business and community banking. She is the author of Big-Box Swindle and also produces a popular monthly newsletter, the Hometown Advantage Bulletin. Follow her on Twitter.
This op-ed is cross-posted from Other Words, which distributes commentary articles to newspapers. It is licensed for use under a Creative Commons “Attribution-No Derivatives Work” license.
Sam Walton opened the first Walmart store in Rogers, Arkansas, 50 years ago this month. Sprawled along a major thoroughfare outside the city’s downtown, that inaugural store embodied many of the hallmarks that have since come to define the Walmart way of doing business. Walton scoured the country for the cheapest merchandise and deftly exploited a loophole in federal law to pay his mostly female workforce less than minimum wage.
That relentless focus on squeezing workers and suppliers for every advantage has paid off since July 1962. Walmart is now the second-largest corporation on the planet. It took in almost half-a-trillion dollars last year at more than 10,000 stores worldwide.
Walmart now captures one of every four dollars Americans spend on groceries. Its stores are so plentiful that it’s easy to imagine that the retailer has long since reached the upper limit of its growth potential. It hasn’t. Walmart has opened over 1,100 new supercenters since 2005 and expanded its U.S. sales by 35 percent. It aims to keep on growing that fast. With an eye to infiltrating urban areas, Walmart recently introduced smaller “neighborhood markets” and “express” stores.
While the big-box business model Sam Walton pioneered half a century ago has been great for Walmart, it hasn’t been so great for the U.S. economy.
Walmart’s explosive growth has gutted two key pillars of the American middle class: small businesses and well-paying manufacturing jobs.
Between 2001 and 2007, some 40,000 U.S. factories closed, eliminating millions of jobs. While Walmart’s ceaseless search for lower costs wasn’t the only factor that drove production overseas, it was a major one. During these six years, Walmart’s imports from China tripled in value from $9 billion to $27 billion.
Small, family-owned retail businesses likewise closed in droves as Walmart grew. Between 1992 and 2007, the number of independent retailers fell by over 60,000, according to the U.S. Census.
Their demise triggered a cascade of losses elsewhere. As communities lost their local retailers, there was less demand for services like accounting and graphic design, less advertising revenue for local media outlets, and fewer accounts for local banks. As Walmart moved into communities, the volume of money circulating from business to business declined. More dollars flowed into Walmart’s tills and out of the local economy.
In exchange for the many middle-income jobs Walmart eliminated, all we got in return were low-wage jobs for the workers who now toil in its stores. To get by, many Walmart employees have no choice but to rely on food stamps and other public assistance.
Walmart’s history is the story of what has gone wrong in the American economy. Wages have stagnated. The middle class has shrunk. The ranks of the working poor have swelled. Whatever we may have saved shopping at Walmart, we’ve more than paid for it in diminished opportunities and declining income.
And the worse things get, the more alluring Walmart’s siren call of low prices becomes. While the Ford Motor Co. once profited by creating a workforce that could afford to buy its cars, today Walmart profits by ensuring that Americans cannot afford to shop anywhere else. The average family of four now spends over $4,000 a year at Walmart.
Such market concentration is unprecedented in U.S. history, as is the concentration of wealth it has engendered. Sam Walton’s heirs own about half of Walmart’s stock and have a net worth equal to the combined assets of the bottom one-third of Americans — about 100 million people. This year alone, the Waltons will pocket $2.7 billion in dividends from their Walmart holdings.
They are among the few Americans who have reason to celebrate Walmart’s 50th birthday. As for the rest of us, the milestone offers a good moment to reflect on the company’s business model and where it might lead us if we allow Walmart’s growth to continue full-steam for another 50 years.
Or, for that matter, why does Best Buy have one in the Republic of Mauritius? And why does the supermarket chain Supervalu, which has exactly zero stores outside the U.S., maintain five subsidiaries in exotic locales like the Grand Cayman Islands?
Tax avoidance might be the answer. All three of these countries are known as tax havens, places where corporations and wealthy individuals can hide their income from the IRS. According to a U.S. Government Accountability Office report, 83 of the 100 largest U.S. corporations now have subsidiaries in offshore tax havens. Recent studies have estimated that these schemes enable big companies to dodge between $37 and $60 billion a year in taxes.
Small businesses don't have the option of hiding profits overseas, which puts them at a distinct competitive disadvantage. The U.S. now has, in effect, two tax systems: one for corporations and one for small businesses.
Why should people shop local this holiday season? One reason is that shopping at an independent business, instead of a chain, generates far more benefit for your local economy. Several recent studies have found that a dollar spent at a locally owned business generates 2-3 times as much local economic activity as a dollar spent at a chain and supports many more local jobs.
Another compelling reason to go local this year is to make the holidays fun again. Who wants to sit in traffic at the mall? It's so much more rewarding to stroll through the small stores in your neighborhood or downtown. You'll not only find unusual gifts that don't come from a sweatshop, but you're bound to run into friends, get into an interesting conversation, enjoy the beauty of historic buildings decked out in lights, take time to savor a hot chocolate at the local café — in short, you'll have a chance to really experience and celebrate the place in which you live.
What I find most striking about my mother-in-law’s memories of the neighborhood where I live, and where she spent her childhood in the 1940s, is how many businesses our little residential section of town once boasted. Back then, there was a grocery store, hardware store, barber shop, two drugstores, a tailor, and several corner stores.
Those businesses all disappeared in the following decades, as the streetcar lines were dismantled, families acquired cars, and shopping migrated out to supermarkets and, later, malls and big-box stores. At the low point, my neighborhood hosted little more than a lone convenience store, great for snacks and beer, but not much else.
Recently that began to change: first a restaurant opened and then a tea shop. And then, in what many of my neighbors greeted as nothing short of a gift from heaven, a small fresh food market opened. Stop by at 6 in the evening and you’ll find a row of bicycles out front and the store's narrow aisles packed with people pondering their dinner options.
This little store is one of hundreds of new neighborhood businesses that have opened in the last few years in what might be both the beginnings of a revival of small retail and one of the more important strategies we have for countering global warming.
In one of the more brazen attempts by a corporation to disguise itself as a locally owned business, Starbucks is un-branding at least three of it Seattle outlets.
The first of these conversions, reopening this week after extensive remodeling, will be called 15th Avenue Coffee and Tea. All of the signage and product labels will bear this new name. The Starbucks corporate logo will be no where to be seen.
We're continuing our commitment to delivering specialty coffee excellence while refreshing our store design approach with amplified focus on local relevance... Ultimately, we hope customers will feel an enhanced sense of community and a deeper connection to our coffee heritage.
This is the latest, and arguably most audacious, in a string of corporate attempts to imitate and co-opt local-ness (see a recent investigation at New Rules Project: The Corporate Co-Opt of Local).
Starbucks learned how to act like a locally owned, neighborhood café by studying several independent coffeehouses in Seattle. One was Seattle Coffee Works, a small, 300-square-foot café. On the café's blog, co-owner Sebastian Simsch writes:
Last winter, three separate delegations of Starbucks folks came by. Each time they filled our little store so that no one else could fit in. Usually they didn’t introduce themselves, and one delegation even lied, saying they were just a group of Japanese tourists. They didn’t buy a single drink.
Starbucks people also logged many hours at Victrola Coffee Roasters. "They spent the last 12 months in our store with these obnoxious folders that said, 'Observation,'" owner Dan Ollis told the Seattle Times.
In the most obvious rip-off of an independent business, the décor of the new 15th Avenue Coffee and Tea, which the Seattle Times describes as a "rustic, eco-friendly style," is virtually identical to that of Smith, a successful bar next door. Owner Linda Derschang says Starbucks copied everything, from her vintage industrial light fixtures to her wooden seats, and even asked one of her managers where the bar's awnings came from. In an interview with the Seattle Post-Intelligencer, she noted:
It's got a lot of salvaged wood, it's the same paint color inside as Smith and some of the wood framed chalkboards look very, very similar… Where's the independent spirit in knocking someone off?
Starbucks plans to convert at least three of its Seattle outlets to uniquely named neighborhood coffeehouses. If the experiment proves successful, the approach will be extended to more of the chain's 16,000 outlets.
Starbucks has struggled over the last year. Some 600 outlets have been shuttered in a bid to cut costs. Yesterday, Starbucks reported that same-store sales were down 5 percent in the last quarter, after declines of 8 and 9 percent in the previous two quarters.
Immersed as we are these days in discussions of carbon emissions and carbon offsets, food miles and feedback loops, Earth Day has come to feel more and more outmoded, a throwback to an earlier era before melting ice caps and the prospect of the end of life as we know it made the environment no longer a periodic concern but an everyday worry.
Earth Day is no longer ours anyway. That became abundantly clear this year. Corporations have seized Earth Day and turned it into a kind of holiday, which, like all holidays in modern America, affords ample opportunities to peddle more merchandise. Reusable shopping bags, Lexus Hybrid Living Suites, and other "eco-friendly" products are now to Earth Day what new cars are to Presidents Day. The trade journal Advertising Age neatly captured the trend in a recent headline that asked, "Is Earth Day the New Christmas?"
Most of these corporate greenwashing schemes are clumsy and transparent. But one company has developed a far more sophisticated, and ultimately much more dangerous, approach to manipulating environmental sentiment for its own expansion and profit.
The Broadside took a couple of days off for turkey, stuffing, and family fun. We're back today with a reminder of why we shouldn't spend our holiday shopping dollars without thinking about the impact of our choices.
by Stacy Mitchell
Whether to patronize a chain or a locally owned business is not top of mind for many holiday shoppers, but it should be. It's a choice that has profound implications for our economy.
If you shop at an independent toy store, such as Be Beep in Annapolis, Maryland, you will likely see products made by Beka, a small toy manufacturer in St. Paul, Minnesota.
A family-owned business, Beka has opted not to sell to chains like Target and Wal-Mart. Doing so, explains co-owner Jamie Kreisman, would require moving production to low-wage factories overseas, which would eliminate what he and his brothers most love about the business: their relationships with their employees and working hands-on with their products.
Beka is healthy, but its future depends entirely on the survival of independent toy stores. Over the last decade, Wal-Mart and Target have aggressively overtaken this sector and now capture 45 percent of U.S. toy sales.