James Hall, Contributing Writer
Buying at large box stores is a way of life for many consumers. Wal-Mart, Home Depot and Target are routine locations to spend your hard-earned dollars on items of necessity.
However, what happens to the profits when the sale is completed and the bills are paid? Does the money stay in the local community, where the transactions are generated, or are they filtered off to the treasury of public companies that dominate the economy?
The pitiful answer, well known to the chagrin of the small business enterprises, is a prime reason why the middle class is vanishing.
For several decades, the corporatists expedited their transfer of the manufacturing sector overseas. The resulting elimination of high paying jobs and benefits is a direct result of the Free Trade policy designed to impoverish ordinary families. The importation of slave labor products that fill the shelves of the internationalist chain stores resulted into the removal of domestic items, not solely because of the cost of goods, but by a designed objective to reduce the standard of living in our country.
Stacy Mitchell makes valid points in Don’t Subsidize Big Boxes at Local Shops’ Expense,
Sifting though the postmortem news of Borders Group’s demise, I came across a local newspaper story about a California town that had spent $1.6 million to lure a Borders bookstore to a local shopping center. According to the paper, government officials in Pico Rivera in 2003 agreed to pay part of a new Borders store’s operating expenses by providing a $10,833 monthly subsidy for the next 15 years.
Wal-Mart Stores (WMT) has been a frequent recipient. From 2008 through 2009, the company pocketed $7.9 million in tax exemptions from local development agencies in New York, according to data from the state comptroller. Wal-Mart also received $1.8 million in tax credits and rebates in 2009 to build five supercenters in Louisiana, records kept by the state’s Board of Commerce & Industry show. Last year, the St. Louis Post-Dispatch reported that the city of Bridgeton, Mo., approved a $7.2 million deal to finance construction of a single Wal-Mart supercenter.
Other big retailers have been at the public trough, too. Target (TGT) picked up $1.4 million in local tax breaks to build a store in the small town of Kenner, just outside New Orleans, according to the Times-Picayune. Amazon (AMZN) secured a five-year sales tax exemption from the South Carolina legislature in exchange for opening a distribution center in the state.
Corporate welfare is a major factor in the demise of tangible free enterprise. The notion that corporations merit subsidizes to attract their business is an even more hideous concept.
The article Shopping with Local Merchants Benefits Economy, Environment by Beth Turner illustrates the bad economics that actually hurt local economies.
According to Tulsa-Centric, a company created to support local businesses, ‘For every $100 you spend at a local merchant, 68 of those dollars return to the community. When spent at a national chain, only $43 stay in the community.’ This doesn’t even take in to consideration how much we’re lessening our carbon footprint by cutting down on shipping, hauling and packaging.
Following up on the ill served Borders experience, further evidence is cited in the EXECUTIVE SUMMARY – ECONOMIC IMPACT ANALYSIS Local Merchants vs. Chain Retailers.
1) Local merchants generate substantially greater economic impact than chain retailers.
2) Development of urban sites with directly competitive chain merchants will reduce the overall vigor of the local economy.
3) Modest changes in consumer spending habits can generate substantial local economic impact.
For every $100 in consumer spending at Borders, the total local economic impact is only $13. The same amount spent with a local merchant yields more than three times the local economic impact.
The economic formula for the Wal-Mart business model is to undercut everyone. Volume of sales and products translates into one-stop shopping. Their dominance from this type of operation drives out the merchant shopkeeper. Is this really free enterprise, or is it a well-staged blueprint to impoverish local economies, financed with government subsidies, on the back of the taxpayer?
The consequence of the box store economy is that the chain stores set the wage scale. Small business entrepreneurs are forced out of business and relegated to hired-help status. The velocity of money slows as local disposable income shrinks due to the lower prices charged by the chains. The tax incentives and exemptions only benefit the mega stores, while the former owners of eliminated businesses and the customers who flock to the lowest price bear the costs in their property and state taxes.
Over the last decades, this pattern plays out in every community. The demise of viable local economies is visible in the decay and dependency culture that replaced the independent merchant marketplace. Wall Street’s propensity to drive out small business and supplant global franchised outlets is a major factor in the systematic reduction of the domestic standard of living.
It is not by chance that the elites of finance promote a scorched earth policy for Main Street. Their desire to cheapen products and wrangling the public into an addiction of buying junk is a given. What not well understood is that the supercenter is a fortress ready for a barbarian assault. Their high wall of pricing protection relies upon cheap imports. Nevertheless, the weak dollar exchange rate is in the process of an inevitable total demise. As the dollar panic accelerates and the loss of purchasing value quickens, the cost of imports will spike. The foreign manufacturers will experience a sharp decline in sales and their factories will slow down or close.
The solution to this contraction that relies upon the “as needed” inventory and container ship delivery paradigm is the return to a domestic manufacturing and a merchant economy. When the financial bubble bursts, and the chain stores close, where will you buy items for everyday use? Learn this lesson now and shop local whenever you can.
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James Hall is a reformed, former political operative. This pundit’s formal instruction in History, Philosophy and Political Science served as training for activism, on the staff of several politicians and in many campaigns. A believer in authentic Public Service, independent business interests were pursued in the private sector. Speculation in markets, and international business investments, allowed for extensive travel and a world view for commerce. He is the publisher of BREAKING ALL THE RULES. Contact [email protected]