Monopolies Are Killing America
Ross Baird

I’m a little surprised not to have seen the term above that encompasses so much of the shift from small to large in businesses:

economies of scale

Often, what drives small local businesses under is not so much any intentional or organized attempt by The Bigs to plow them under, but rather merely an un-economic scale that they operate in becoming steadily more expensive and prohibitive, with more and more revenues being taken up by costs than profits. Everything from supplier memberships to insurance premiums to advertising to facilities costs to local taxes goes up and up and up, and the local storefront has little resource of its own to be able to keep up with these increases unless it is able in parallel to increase its incoming revenues commensurately.

It may be a chicken-egg argument, whether big companies are behind all the destructive rise in costs of doing business, or that big companies are simply more able to exploit them for their own advantage, due to their greater economies of scale. A Walmart can afford to have a single location fail and shut down, while a retailer that only has the one location, cannot. Et cetera.

And there is a further source of angst for local small business, which is “brand loyalty.” Once the idea of “shop local” becomes a matter of principle and not of affordability or accessibility of products and services, it starts to get personal: the local shopper starts to feel like going to Joe’s Hardware is basically doing Joe a favor, and what has Joe ever done for them? Or what might he be told he owes them back in the community? Maybe Joe is also on the school board. Maybe “after all this community has done for you” starts to be a kind of leverage to get Joe to be the swing vote on a controversial bond issue, etc, etc.

It gets to be where NOT going to Joe’s, is doing Joe a favor. Maybe Joe needs to read the writing on the wall, and stop making us feel guilty for every time we go to Home Depot, and quit not while he’s ahead but before he falls any further behind and starts to embarrass the whole town….

And what was Joe’s original wrongdoing? Not having economy of scale. While Home Depot gets its incoming product by the boxcar-load and has regional warehouses to store up overstocks to take advantage of low wholesale prices, Joe has this little outfit with three vans and two drivers and a three-hundred-mile delivery route that Joe is out on the tail end of, and THEY are starting to treat Joe like they’re doing him a favor, for selling him his product at only forty percent more than Home Depot gets it for instead of double, like they ought to.

A lack of economy of scale, among small-town and local businesses and their potential clientele, does start to make things get personal. That is a function of life, when there is less population and therefore less anonymity.

Joe’s wife is annoyed with him and has been for years, over all those payables on in-house credit accounts that he never had the good sense not to hand out the way he does. Joe’s daughter wants to go to an expensive university, and there’s no money. The damn hardware store ate it all. And she goes to high school with the kids of the people who owe her dad money. She blames them for her trouble being able to count on the education her dad started the business to offer her in the first place. Her attitude does not go unnoticed, and the other kids start to bully her online. And when her dad balks about this bond-issue business, one of his bigger debtors, her basketball coach, sort of forgets to put her on the starting lineup, which had been the one shot she had of getting an athletic full-ride. After all, with all this community has done for him, etc, etc…

Joe closes down Joe’s Hardware, to save his marriage, salvage his place in the community, and to get a job with Home Depot because his daughter still expects him to make good about going to Stanford. And down at the McDonald’s, the local klatch is bemoaning how America is going downhill, while half the people around the locals’ table owed Joe’s money but will never have to pay it now…

It’s an avalanche effect, and not always an easy one to see coming, and even harder to track down just how or where or when that first little ledge gave way, or whose fault it really was. But it all traces back to economies of scale, and how they leverage the larger outfits and disadvantage the smaller ones. I’m not sure it’s really anyone’s fault, or that there is any ready solution to hand.

Romanticizing the local shopping experience is hardly any answer, because that way lies a whole lot more personal favors and long-held grudges over them, anywhere human beings live (the most advantage-seeking species in all of nature) than anyone may be ready to recognize.

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