Arizona Eagletarian

Arizona Eagletarian

Monday, December 29, 2014

We Live in Capitalism, but...!

One of my heroes, Bill Moyers, who I consider one of the most soft spoken revolutionaries of our time, recently posted an interview on his website with science fiction and fantasy writer Ursula K LeGuin. LeGuin was recently honored by the National Book Foundation.
In 2014, Le Guin was awarded the Medal for Distinguished Contribution to American Letters by the National Book Foundation, a lifetime achievement award. Her acceptance speech, which criticized Amazon as a "profiteer", and praised her fellow authors of fantasy and science fiction, was widely considered the highlight of the ceremony. 
Here's her speech. The most salient point she made begins at 4:10 into the clip.



Notably, Le Guin said,
We live in capitalism. Its power seems inescapable... So did the divine right of kings. Any human power can be resisted and changed by human beings. Resistance and change often begin in art and very often in our art, the art of words.
The American Revolution, invoked by the Declaration of Independence, was a revolt against Great Britain and King George the whatever. Even more importantly, it was a revolt against the entire concept of hereditary succession achieved by the start of a new form of government -- Republicanism. It's extremely important to grasp that the word -- Republicanism -- has absolutely nothing to do with the political party we now know as the GOP.

Republicanism shifted the political paradigm to recognize the citizen as sovereign. The People's Sovereignty.
Popular sovereignty or the sovereignty of the people is the principle that the authority of the government is created and sustained by the consent of its people, through their elected representatives (Rule by the People), who are the source of all political power. It is closely associated with republicanism and social contract philosophers such as Thomas Hobbes, John Locke and Jean-Jacques Rousseau. Popular sovereignty expresses a concept and does not necessarily reflect or describe a political reality.[a] It is usually contrasted with the concept of parliamentary sovereignty, and with individual sovereignty. The people have the final say in government decisions.
Benjamin Franklin expressed the concept when he wrote, "In free governments, the rulers are the servants and the people their superiors and sovereigns".
These ideas are intricately woven into what I've written on this blog for the last four years. When I described Machiavellian Democracy, it was about classical Republicanism.

These days, conservative and/or Republican pundits are inherently confused. They, notably Doug MacEachern, who rarely, if ever, writes anything that sets forth a coherent argument; and Bob Robb, who can argue rationally but still misses the entire point of government because he can sometimes seem to lack awareness of the social contract.

What got me started on this post was reading an op-ed by Local First Arizona founder Kimber Lanning which the Republic published on Friday. She effectively (highly effective, by the way) rebutted a Bob Robb column that asserted the local first concept to be faulty. Robb said,
The genius of a free-market system is that it facilities maximizing satisfaction for highly differentiated consumer preferences. And that includes preferences about shopping experiences. It would take an arrest warrant to get me to go to one of those megamalls. But they are packed with people, particularly this time of year.
Some people prefer the shopping experience of going to a big national chain with a mind-boggling array of goods. Some prefer specialty shops with smaller and quieter environments. Some people want a good at the lowest possible price. Some are willing to pay a little more for better customer service.
Some like the heft of a national chain behind what they buy. Some prefer knowing that the shop is locally owned.
The "buy local" movement, however, exhorts us not to maximize our consumer preferences. Instead, we should buy local, even if we'd prefer the value proposition of a national chain. The local economy is depending on you.
Robb cited exactly ZERO references in his "analysis." But the underlying philosophy he writes from, especially in this column, is Milton Friedman's Free to Choose. Friedman, of course, was also a key advisor to Ronald Reagan. Robb also grossly misses the target with his false claim that "The 'buy local' movement, however, exhorts us not to maximize our consumer preferences."

Lanning debunked Robb's false claim. She exquisitely demonstrates that consumers can make better and more informed decisions. By the way, she advocates Local First NOT Local only.
In his article, Robb questions the countless economic studies released since 2002 but does not offer any substantive reasons for the questioning. Instead of following Robb's simplistic calculations, let's turn to the professional economists who back these studies, which have all concluded that an average of $30 more out of every $100 spent will stay in the local economy when money is spent with a local company versus a non-local corporate entity.
A Civic Economics study from 2007 showed the state of Arizona's then-$5 million contract with OfficeMax was causing the state to lose $500,000 per year in economic leakage.
The methodology shows OfficeMax did not offer 62 percent of their employees any health-care benefits, costing Arizona taxpayers significant money to support them through the state's health-care plan, which drains the economy.
Those are actually not cheaper prices at OfficeMax. That's deferred billing: we are paying higher prices when we factor in the true cost of doing business with OfficeMax.
In comparison, Wist Office Products, their local competitor, provides 100 percent of their employees' health-care benefits. OfficeMax supports no business service jobs, called secondary jobs, in Arizona. They don't hire local accountants, graphic designers, attorneys, payroll service providers or any other business, while Wist sources more than 80 percent of their goods and services locally, which creates jobs.
While Robb makes the case that it's too complicated to measure all of Arizona's companies and how often they hire other local businesses, it's important to understand why that number, called the multiplier effect, is vastly greater at locals than chains, regardless of whether or not it's precisely measured.
If America had 30,000 Starbucks locations, the company would still only support one accounting firm, one graphic designer, one website developer, etc. Conversely, 30,000 independently owned coffee shops support 30,000 accountants who have a client, 30,000 website developers who have a gig, 30,000 graphic designers, and so on.
The chain-store model actually eliminates three jobs for every two it creates.
Robb also touts economies of scale, which should be the saving grace of a free-market society. But it's not cheaper to buy a latte at Starbucks. Or tires at Costco, or a movie at AMC. And if you measure the true cost of doing business with most chain stores, there simply is no reward for economies of scale. Unless, of course, you count gains so short they are measured by the day and not the year.
Money in a customer's pocket for a day certainly doesn't change the outcome of a community when the overall community's economy is attached to a lead balloon that includes low-wage jobs, no health-care benefits, and no secondary or tertiary job market.
The whole notion that money saved at chains drives an economy is flawed because it assumes chains are always cheaper, which isn't true. And any savings is significantly offset by jobs eliminated as well as lost income overall.
Economies of scale only work in a free-market society, which we are not. Our food is subsidized — consider 80 percent of all farm-bill dollars since 1995 went to the largest 10 percent of America's farms for commodity crops, which is why processed fast food is so cheap.
Our oil is subsidized, our biggest banks are subsidized, and even chain stores are subsidized — all using taxpayer money. To believe in free markets in the U.S. today is like believing in the tooth fairy. Americans actually have forgotten how the economy works and have no tools to measure the true costs — human, social or environmental — of doing business. To suggest that we shouldn't care about these costs is shortsighted and reckless.
Those who tout free markets often site large chain stores as shining American examples of free-market success, but in reality most of their success is easily traced to massive subsidies, passing the health-care buck to the taxpayers, and wages so low that today roughly 15 percent of Americans are on food stamps even though they have jobs.
In Arizona, Cabela's received more than $60 million in subsidies, and Bass Pro Shops more than $30 million. Walmart is the master of the subsidy, exploiting municipalities' drive for the short-term gains of sales taxes while bringing low wages, very little health-care coverage and then benefiting from food-stamp usage.
Chain stores actually create bigger government. Look around at low-wage jobs and the shrinking middle class. The corporate economy is failing the country, and our government is using our money to pay for it. One solution is to do business locally. Will it save the country? No. Does it empower people to make significant changes within their own communities? Absolutely.
Lanning eloquently describes the impact of externalities. Costs to society that are not directly included in the prices a person pays at the cash register. We do pay the external costs, but we pay for them in sales and income and property taxes. As she points out, even the direct costs are NOT necessarily lower at the national chains than they are with the local mom and pop shop.

So, where does the extra money, collected by the national chains, go if not to the consumer initially or in the long run? They go to out-of-state corporations. 

This is parallel to the economics of having state and local government workers provide services that the private sector cannot or will not. Yet, we have the financial predators wringing out an excess share of even that money when government employees are canned and replaced by privateers who then hire part-time and temporary workers (pay them less and provide no benefits). The privateers keep the money with a few key players getting rich while the Middle Class collapses.

So, I digress back to the words of Ms. Le Guin.
We live in capitalism. Its power seems inescapable... So did the divine right of kings. Any human power can be resisted and changed by human beings. Resistance and change often begin in art and very often in our art, the art of words.
As Americans riled up against a political and economic system in the 18th Century turned the divine right of kings on its head, so too will 21st Century citizens of our country and others turn away the excesses of financial capitalism in favor of a legitimately representative government and economy.

What will YOU do about it?

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Today it is a case of the grasshopper pitted against the elephant. But tomorrow the elephant will have its guts ripped out. Le Loi, Vietnamese emperor, 15th Century.

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