Where are the ideas to bring back fairness, equality and a vibrant middle class? This question came up at a dinner party recently and the answer is not all that inspiring but it’s true – the ideas are the ones that were dominant from the beginning of the New Deal until the election of Reagan. They’re not new ideas. They’re the old ideas that worked and still would.
They’re the ideas that were quietly reviled by the malefactors of great wealth who organized over decades, under the radar, to erode the practice of those ideas. They openly propagandized against the ideas and when these corporatist forces had the strength to do so, they legislated them out of existence.
Part of the propaganda campaign is to say ideas like progressive taxation, minimum wages, unions, and public spending on infrastructure and education were created for a different world and can’t work anymore. They urge you to discard those ideas (which is their overall goal) and then they create a strawman by demanding new ideas from the left, when they are not necessary.
It occurs to me that there are even more ideas that are so long discarded, so antithetical to the 1%, that nobody even considers them anymore. But they once were considered essential and effective in guarding against the inequality we now suffer from.
From the beginnings of state commercial codes through the mid 20th century many states had laws either prohibiting chain stores (limiting how many stores one person or family could own performing a similar service) or taxing them more than independent stores. You may not have had a WalMart or McDonalds under these laws and there was a good solid economic reason to discourage them.
Imagine that every new WalMart built displaces an average of 50 small businesses. 50 families have their middle class income, derived from ownership, transferred to that 1 family in Bentonville, AR. Multiply that over 1,000 stores and 50,000 families have funneled their modest wealth to 1 fabulously wealthy family in Arkansas!
Consider that today the most accepted way to get rich other than through winning the American Idol or NBA draft lottery is to franchise an idea. It’s not about the one or handful of stores that can make you a good living, it’s about instant wealth by having hundreds or thousands of stores. Many of the early lawmakers saw that as a means of taking wealth out of communities and creating large interests when small local interests were thought best.
When did it become a better idea to maximize the wealth for an individual at the cost of what was best for a community? On its face it’s clear, it never did become a better idea. But it sure became acceptable morally and ethically, and in fact, it became a legal matter that those laws that safeguarded the local community were sloughed off as old fashioned and anti-business.
But it wasn’t even so long ago really. At the turn of the 20th century there were about 50 chains in retailing. Today there are about 50,000. This editorial by the National Association of Retail Druggists Journal appeared in a 1936 volume:
The selﬁshness of those who would control the money power of the nation, if their greed is allowed to develop unchecked . . . [would leave] masses of Americans wholly at the mercy of the despotic power of a monopolistic class.—National Association of Retail Druggists Journal
Paul Ingram of Columbia University and Hayagreeva Rao of Northwestern reprinted this editorial in Store Wars: the Enactment and Repeal of Anti-Chain-Store Legislation in America. They write:
Before the chains, the independent retailer was a deeply institutionalized element of American economic and social life, ingrained in the prevailing concept of community, and a key link in the opportunity structure that was then seen as a foundation of American democracy.
Chains rose after WWI, multiplying in the 20s like never before. From the Corporate Research Project:
At the start of that decade, the 20 leading chains had fewer than 10,000 stores. By the end of the decade, they had more than 37,000. A&P, the leader in the grocery segment, jumped from about 4,500 to more than 15,000. In apparel, J.C. Penney went from about 300 to more than 1,400. And in the drugstore sector, Walgreen’s leaped from 23 to 440. The impact in market share terms was most dramatic in groceries. By 1929, A&P and competitors such as Kroger and Safeway had captured nearly 40 percent of the market.
In this light, there was a clamor for anti-chain store legislation. Much like today’s anti-WalMart activists, independent retailers and community activists urged people to keep money in the community by not shopping at chain stores. Many states enacted taxes on chain stores to discourage them. a form of “protectionism” for the local independent retailer.
But the deeper pockets of the pro-chain store forces fought back and reversed the laws.
If the people of the United States like our stores so little that they are willing to tax us out of business, that is their affair. We will shut up shop.—president of the Atlantic & Paciﬁc Stores, the largest chain in the U.S. in 1939
Sounds familiar, huh? If we don’t get our way we’ll close up and take the jobs with us. They formed lobbies of their own including the National Chain Store Association, tasked with spreading good chain store public relations. A&P alone bought extensive space in newspapers and sent speakers to civic organizations to proselytize on their behalf.
Obviously, we know who ultimately won this battle. 1937 was the high point of anti-chain store legislation and popular opinion. The protectionists lost to the free traders of unfettered capitalism. The question remains though: should they have? Would we have been better off if we’d taken a stand in the 20s and 30s so that WalMart and its ilk would have never grown into the wealth siphoning malignancies they are today?
Can we take up the idea of incentivizing small business in real economic terms?