Tuesday, January 15, 2013

You Can't Vote with your Feet when You're on a Chain Gang

My friend Kevin Aldrich comments on my post Cows and Computers  ...

Every week my wife gives Walmart about $300 for which we get groceries and other necessaries for our family of nine cheaper than anywhere else. What is so bad about that? If their prices go too high or the quality is too low, we and millions of others will vote with our feet and go elsewhere. Why should the government give an unfair advantage to businesses which are not as efficient as Walmart? Walmart puts others out of business because people voluntarily choose not to patronize those other businesses.

The problem, Kevin is you can't vote with your feet when you're on a chain gang.

When Wal-Mart moves into a rural area, their size allows them either to offer loss-leaders or to sell at prices that are far cheaper than the independent grocers, who cannot buy cheap in large quantities from their suppliers the way Wal-Mart can.  This has resulted in the closing of independent groceries and retail outlets, and has contributed to the decimation of Main Street U.S.A.  Yes, consumers patronize Wal-Mart freely at first, but they do so because of Wal-Mart's unfair advantage; there comes a point, however, when the absence of competition means the choice is no longer free - and no longer a choice .  For once competition has been eliminated in any market anywhere, see what happens to prices and customer service.  Remember when Southwestern Bell and the other Bells were the only game in town?  Outrageous pricing, rude service, and contempt for the customer was the norm.  The same thing happens even today with cable companies that have licensed monopolies in their communities.  If you can't see the dangers of unfair competition and monopoly, you are hardly a free market capitalist.  For the end result of an unregulated "free market" is anything but a "free market".

A Distributist would simply say, "Let's keep a free market free, and let's keep individual men free.  There is a limit to the size of a business.  Past a certain point an unfair advantage kicks which crushes competition and which leads, eventually, to a de facto slave state and to corporate control of government.  The means of production should not be concentrated in only a very few hands.  Whenever this has happened throughout history, misery and suffering for the vast number of people has been the result.  A town is better off when consumers can indeed vote with their feet.  Competition is good and healthy for the economy; but unrestrained capitalism, like socialism, eventually destroys competition."

In brief, if you were once a small shop owner, now working for Wal-Mart, the company that put you out of business, this is hardly a good thing for you and for our country - speaking either economically or morally.


Anonymous said...

Please don’t ignore my comment just because I’m posting anonymously. I simply don’t want to sign up for any commenting ID. I’m a Chesterton fan, and have been greatly curious about distributism, by have generally found it to a wanting, unworkable philosophy.

Generally speaking, I have two main problems with distributism (well, really three, but the third is related to the first). My first problem is that I’ve never seen a convicning argument of why small businesses are more morally acceptable than big businesses, nor have I ever seen a working definition of when a business officially becomes a “big business”. Is it at 50? 100? 1000? And what changed inbetween hiring the 999th person and the 1,000th? Keep in mind that every big business starts out as a small business. I work for the largest company on earth that was started in the garage of two teenagers in northern California

We have to ask ourselves, why do businesses get big? The answer is that they provide a good or service that people desire at a price people can afford. And people can, and should, have the freedom to make their own choices. The aforementioned biggest company in the world started out small. The hated Wal-Mart started out as a single five and dime in Arkansas. The Walt Disney company started out as three guys, Walt, his brother Roy, and their childhood friend Ub Iwerks. All of these companies provided a good or service that people wanted, and thus succeeded. And big companies don’t harm smaller companies, they help them. The creation of the ipad and iphone has employed thousands more people both at the company itself and all the developers that make apps. Wal-Mart may cause some smaller businesses to go out of business, through the process of creative destruction, but creates a lot more opportunities for other small businesses near them by revitalizing economic areas. And of course, Disney has hired thousands of people as well as employing people in secondary markets.

Also, and I can not stress this enough, people have the right to decide what is most economically beneficial for them.

My second problem with distributism, is this: what is the mechanism that stops a small business from becoming a big business? Distributism, as faras I understand, believes that there is a certain size of a business over which that business becomes evil. But since businesses become larger by providing good and services that people want, what is the mechanism that keeps them small? Does the government do it? And isn’t that a horrible infringement on peoples’ rights? If it is the government’s right to limit the size of business, then I see no difference between distributism and socialism.

Again, I’m a Chesterton fan, and I want to understand distributism, but it simply does make any economic sense.

Anonymous said...

Whoops, my last sentence should read "does NOT make economic sense"

Kevin Aldrich said...

Since you quoted me in your blog, please indulge a long, somewhat sideways reply from something I wrote for something else, but which has to do with rural economy and protecting the little guy whose way of life is threatened. Sorry to use the USCCB as my whipping boy.

In 2003, the United States Conference of Catholic Bishops (USCCB) published the pastoral letter Catholic Reflections on Food, Farmers, and Farmworkers (FFF). The bishops’ document is a “reflection.” As such, it is authoritative in its doctrinal principles but not necessarily in its practical applications. In fact, the bishops “realize that taking positions on these issues involves prudential judgments and that people of good will may disagree about the application of Catholic principles to specific policies” (FFF A Catholic Agenda for Action).

The USCCB sees the American family farm as a great good, but the number of family farms and rural life in general have been declining steadily for almost a hundred years. The bishops write,

Catholic teaching about the dignity of work insists that farmers must be able to support themselves and their families through their work. This means that they must be able to survive fluctuations in the market and the risks associated with production. (FFF A Catholic Agenda for Action)

The bishops then commiserate with those families who have lost their farms in recent years: “Their loss is our loss” (FFF A Catholic Agenda for Action). Later they add, “We stand with farmers, particularly those who own small and family farms here and abroad, in their struggle to live with dignity, to preserve a way of life, and to strengthen rural communities.” The document then gravely pronounces that policies and actions which help rural peoples to live in dignity, preserve the family farm, and make stronger rural communities are not options, but obligations (FFF A word of hope).

But is this true? Do farmers have a “right” for their farms to survive in changing economic times? Who gave them this right? Who is supposed to enforce it? What would the consequences be if such a right were guaranteed? The underlying argument of the reflection is that the family farm is a good thing; this good thing is threatened; therefore it should be protected. There is no question that family farms are good for the families who have them and that these farms provide the bedrock of much of rural life. In addition, families who live on their own land have a build-in incentive to practice good stewardship so they can hand the farm on to their children. There is also no doubt that the family farm is threatened. But who is going to protect them? How are they to be protected? And why should they be protected?

Let’s go back a hundred and fifty years. Many cobblers supported their families and provided a valuable service by making shoes. Their livelihood was threatened by the mass production of shoe factories. Should their livelihood have been protected too? Should shoe factories have been prohibited? Should the government have set prices artificially high so that shoemakers would continue to get the income they needed to live a dignified life? Should the government have subsidized homemade shoes? There are all kinds of noble and useful professions that could claim the right to exist and to be protected. Do book authors have a right to make a living by the fruit of their writings or do they need to write something people want to pay for? Should a career politician have a right to keep earning a living even when he is voted out of office?

Kevin O'Brien said...

Subsidizing a business that cannot compete because of a change in technology or because they produce an inferior product is wrong.

But that's not exactly the case with small farms, is it? I'm asking because I don't know.

One of my actresses has a father who owns a huge number of cows and who works literally 18 hours a day every day, and he's on the verge of bankruptcy - from loans to keep the farm running, from odd price fixing measures, and other things I just don't understand.

Again, I think you have a point that no businessman has a claim to have his business protected or subsidized - but I would add unless he needs protection from unfair practices that would tend to shut down the free market.

I'm sure there are folks out there who understand the rural economic situation better and can comment on this. At least I hope so!

Micha Elyi said...

Your HTML cannot be accepted: Tag is not allowed: BLOCKQUOTE

When Wal-Mart moves into a rural area...
--Kevin O'Brien

...the same thing happens that happened when the Sears Roebuck catalog arrived back in the 19th century and when Internet service arrived yesterday.

Face it, in any free economy that includes mass production there will be mass merchandisers.

[Y]ou can't vote with your feet when you're on a chain gang.

Please don't lose track of the difference between a metaphor and reality.

A notorious atheist saw where you're going wrong long before you were born:

The rotter who simpers that he sees no difference between the power of the dollar and the power of the whip, ought to learn the difference on his own hide– as, I think, he will.
--Ayn Rand

Anonymous said...

" 2411 Contracts are subject to commutative justice which regulates exchanges between persons and between institutions in accordance with a strict respect for their rights.
Commutative justice obliges strictly; it requires safeguarding property rights, paying debts, and fulfilling obligations freely contracted. Without commutative justice, no other form of justice is possible.
One distinguishes commutative justice from legal justice which concerns what the citizen owes in fairness to the community,
and from distributive justice which regulates what the community owes its citizens in proportion to their contributions and needs."

CCC: "1885 The principle of subsidiarity is opposed to all forms of collectivism.
It sets limits for state intervention. It aims at harmonizing the relationships between individuals and societies.
It tends toward the establishment of true international order."

All Catholics must work within the paramenters of these teachings.

poetcomic1 said...

This really sidesteps the issue #1 which is that Walmart is ChinaMart.

Anonymous said...

Distributism, as far as I understand, believes that there is a certain size of a business over which that business becomes evil.

Libertarianism, as far as I understand, believes that there is a certain size of a government over which that government becomes evil.

Big business needs some regulation, but big government is FAR, FAR more dangerous.

“Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience.”

—C. S. Lewis

The OTHER Anonymous said...

In a truly FREE market, businesses would reach the optimal size, not necessarily be subjectively "big" or "small." In any event, as Chesterton recommended, when a business MUST be big, the ownership should be "small," i.e., spread out among people holding shares with full rights of private property (e.g., voting, dividends, etc.).

The problem, however, is that distributism — and Keynesianism, Monetarism, and Austrianism — all take for granted a disproved assumption, i.e., that it is impossible to finance new capital formation until and unless consumption is first reduced and money savings accumulated. (Harold Moulton of the Brookings Institution proved that it is possible to finance new capital using the present value of the capital being financed, without first restricting consumption, and, in fact, that is how capital is typically financed in periods of rapid growth, in his 1935 book, "The Formation of Capital.")

No market can be called "free" if most people are denied the means of acquiring and possessing capital. As Belloc pointed out in "An Essay on the Restoration of Property" (1936), that means bank credit. Unfortunately, if you define "bank credit" exclusively in terms of past savings, you restrict ownership of capital to those who can either afford to save (the rich), or those who can change the definition of fundamental rights such as life, liberty, and property (the State). The former is called "capitalism," while the latter is called "socialism."

Without access to "future savings," the economy is forced into either capitalism or socialism, which then merge into the Servile State due to the weaknesses inherent in both. This is why the emphasis in distributism on forcing businesses to be a certain size is both unjust and unworkable. The only choice when you're trapped by past savings becomes trying to restore property by destroying property as anything meaningful.

Reforming the tax system and monetary system to make it possible for everyone to have equal access to capital credit based on future savings rather than past savings would go a long way toward establishing and maintaining the Distributist State — and without using the club of the State to force people to do what you want them to do. We need a Capital Homestead Act to duplicate and extend the success of Abraham Lincoln's 1862 Homestead Act based on land.