Remain Calm: Your Mom and Pop Shops Are Safe
A discussion of how the economy works and why "Big Business" doesn't hate your guts.
Let’s talk economics, shall we? Only briefly1 because, of course, this is primarily a blog that focuses on the earthshaking questions that arise from the mystery of the Incarnation, the wonder of how the Crucifixion grants forgiveness to men, the legacy of the Mosaic Law, and just how fat Eglon was. I do believe there is a rightful place for discussion of this subject, of course, but in far “headier” discussions, not off-the-cuff or regular publications, as what I type up here (on a dime or regularly) ought to be what’s primary to here: theology. In any case, I’ll permit this occurrence of a discussion of economic realities for two main reasons: one, I think it can vestigially relate to “higher” topics, and, two, it’s an issue that I recently regained conscientiousness toward and want to address for my own sake.
So, I live near a cozy tight-knit town that has a lot of character. Not to get bogged down in the aretaic framework of urban planning (although I could), I believe the reason why towns such as this one I have in mind (the Smalltown, USA chic) are well-liked by people is because (1) by virtue of them being high-density (yet relatively small), it’s more likely that people will know the person next door, down the street, even around the corner, and even the shopowners and aldermen (whatever they may be called); (2) as most are defined by a main thoroughfare (High Street/Main Street) there is a centralized location where people know the community’s spirit, commerce, and activity takes place, a central area for the expression and coordination of what defines them (contra to the residential area I actually live in, which is miserably haphazard); (3) because of their “coziness” they are less likely to see rapid change or expansion, the usual change only manifesting as old buildings being filled by new businesses, and all the neighborhoods and neighbors remaining the same in size, structure, and residency. These are all legitimate reasons, and if I may so speculate I believe our general ennui with the massification of our technological society, in so short a time (which can only be described, honestly, as a traumatic [multigenerational] societal episode), thus still being so close (chronologically, biologically, and mentally) to the “medieval,” undergirds a lot of this affection, as these little pockets of community are the last (though still modernized) vestiges of medieval village life. While societal pressures, namely an abundance of incontinence suffusing the environment, which certainly defines modern society,2 can subdue even these deeply rooted and structural charms, as is happening, these charms being charms still holds true, all other things being equal.
Now, since, for these various reasons, the village-like settlement is much appreciated, the preservation of that is also favored by those receiving direct (residential/commercial) benefits or psychic income from the locale. Accordingly, there is some momentum that moves in the direction and manifests in a continuum of sloganeering generally fitting under the motto “Shop/Buy Local.” Like I said, people appreciate the smalltown charm, and people also realize that what’s going to keep the town charming is not letting it become a desolate husk (like some Rust Belt towns) by driving away the local businesses who keep the town commercially viable, and (sadly) keep the government financially secure to fund law enforcement, waste management, public works, and community events. If the town goes under, well, who’d possibly be able to appreciate it then? (You need moms and pops for mom-and-pop shops, after all.)
Now, the implicit, although explicit enough at times, bogeyman in this movement is the “big buck” stores, the corporate trademarks and advertisements who siphon business from the quaint shops and their friendly owners (again, the moms and pops), outbidding and outperforming them. Amazon is a great example (especially since I’ve seen elements of the anti-Amazon movement in these little towns and their shops), because they provide you quite literally with anything you need (even food, but not insurance policies from what I’ve seen), usually at an average price, a modest shipping fee, and a reasonable delivery time. Who needs to go to The Boutique™ when you have Amazon, which has the ability to reach and satisfy you from any corner of the country (let alone the globe)?
Let me lay out the threat to you in clearer terms. By virtue of being a big business with advanced and well-staffed production structures, Big Buck Store™ (relative to the market of Smalltown) can produce 1,000 widgets in production period X at $11.99 and make a net return after handling operating costs. Because The Boutique™ is family-owned and operated, a legally-recognized small business, with, say, six employees, their production capacity is greatly truncated (relative to Big Buck) and they can only produce 300 widgets in production period X and they need to charge $17.99. Now, since the market of Smalltown demands 700 widgets at $9.99, this tells us three things: (1) Big Bucks can better meet the demands of Smalltown; (2) Boutique produces too little to meet the demand of Smalltown; (3) presuming price elasticity in this situation, because Boutique charges $8 more than the market price, consumers are incentivized to seek less costly producers of widgets. The conclusion this makes us draw is that consumers in the Smalltown market will tend to do business with Big Bucks instead of Boutique. If The Boutique™ cannot find a way to improve upon its factors and structures of production, or cannot break even through the cumulative sales of other types of widgets (assuming it doesn’t only sell widget X), then this firm will go out of business. Taking its place will be Big Buck, which can better meet and satisfy the demands of Smalltown’s market, and so the mom and pop who own and operate this store will be out of business, they might feel demoralized and go into retirement, and will quickly shrink away from their prior status in relation to the wider community, meaning said community will lose a portion of its aforementioned charm. There are several brick-and-mortar, mom-and-pop shops I know of that fit the hypothetical description of The Boutique™, and I know for a fact I’d be upset if they disappeared.
This is the economic situation that faces most small businesses and villages, and it’s what undergirds the “Shop/Buy Local” movement, which, again, is further tied up in appreciating and preserving the charm of small, tight-knit towns. The economic forces at play here are clear. People (acting as consumers) have wants and needs, and they demand goods and services to satisfy these, and other people (acting as producers) bring together capital goods which can do precisely that (which turn a profit that can be used to satisfy the wants and needs of the producers themselves). This isn’t wrong, insofar as we accept (as we should) that life is good and seeking to keep people alive (in general, even in extraordinary situations) is a good thing, and that providing people with the things they need to stay alive is good. Yet, since we know that the appreciation of small town charm is legitimate, and as I’ve discussed elsewhere, what we can do by right doesn’t trump what we ought to do by virtue, it proves similarly legitimate to feel concern over the destitution of villages and tight-knit communities at the hands of big, greedy, faceless corporate monsters.
What this is demonstrating is that both sides have legitimate points, but it’s confusing to figure out which has the best point. Do we keep out large businesses from small towns to protect mom-and-pop shops, at the cost of economic vitality and commercial activity, leading to destitution, depopulation, and ultimately to the loss of the small town, or do we allow small businesses to compete with multinational firms and get pushed out, leading to the loss of the small towns small-towness? As you can see, either route seems to end in despair, both for the economically minded and the culturally minded.
Oh gosh, but the morals! Who wants to see the cute old couple that runs that bakery go out of business in favor of Cinnabon, Panera Bread, or Krispy Kreme? Isn’t that a negative impact? Alright, before we start pulling the hair out of our heads trying to reconcile these two praxeological subdisciplines (economics as how humans act in interpersonal exchanges, ethics as how humans ought to act),3 let’s ask a different question: Do market forces necessitate an either/or decision, or can we synthesize the two? In other words, are we even required in the first place to make a trade-off between The Boutique™ and Big Buck Store™? I’d answer No, and I’ll explain why by elucidating some additional economic concepts.
First, there’s the fact, as I’ve alluded to, that how humans ought to act is distinct from how humans act in interpersonal exchanges, the latter being a value-free exercise.4 Accordingly, proper economic science informs us that what people do on the market doesn’t matter as much as how they do it, as actions that transgress regular market forces can lead to the misnomered “market failure.”5 Now, since this is the case, people can freely engage in any manner of economic activity, which more fundamentally means they can freely determine how to engage in the direct or indirect exchange of property titles howsoever they please.6 If they so please, the residents of a town can decide to engage in a general (voluntary) boycott of larger businesses moving into their locale,7 they’d be totally permissible in doing this, only insofar as they also favor putting a significant premium on commercial activity and disincentivize entrepreneurship (in other words, “Shop/Buy Local” ultimately leads to there being no “local” to shop/buy from). However, because, as we’ve identified, people can engage in whatever manners of economic activity/interpersonal exchange as they please (so long as it doesn’t involuntary transgress properties) this means nothing of necessity dictates that a local economy can only choose between forcing out competition or forcing out small businesses.
What’s the third option, then? As I’ve found to be the case with many things in life, synthesis! Who says small businesses and big businesses can’t come to an agreement? Who says they can’t cooperate? Especially when the market is grounded on the very act of cooperation and mutual benefit! To put it simply, and I don’t presume to have the hyperrational insights to carefully dictate how this would work,8 I believe the big scary businesses can find a way to work with the meek and mild moms and pops without starving the entire population in the long-run.
Let me give you two examples of how this could work: retailing or franchising. Under the retail model, small businesses would receive goods from wholesalers (in the case of The Boutique™ they can take deals from Victoria’s Secret, Louis Vuitton, and/or Sephora, etc.) and retail them to consumers in the Smalltown market. Like all retailers, Boutique would be able to share in the profits from the sale, thus allowing it to stay afloat, without depriving its local consumers of goods (or services) they couldn’t exclusively receive from the local economy and its production. Little Dorianne and Robert, then, could continue to be the bright and beaming faces of The Boutique™, without being supplanted by the uptight 20-somethings and melancholic day manager Louis Vuitton would import, while Louis Vuitton would still be able to acquire a market share in Smalltown. Now, alternatively, a big business could engage in franchising (or a retailers’ cooperative). In other words, if Dorianne and Robert don’t want to be outcompeted by Louis Vuitton (I guess we’ll stick with them as the meany antagonist in this scenario) and the people of Smalltown don’t want to lose them, but at the same time don’t want to miss out on luxury goods, then Louis Vuitton (or any other company, as a large internal restructuring or a business model from the outset) could franchise them to operate their local store in Smalltown, becoming its managers. I could see the signage now, “Louis Vuitton, brought to you by Dory and Bob!” Insofar as Smalltown’s franchised store remains operated by locals, and its aesthetic isn’t forced by corporate to go too much against the established grain of the community (I believe they’d be incentivized accordingly), this arrangement will be met merrily.
Indeed, I know it’d be met merrily because I’m aware of this arrangement at work in several locations already. One is a vendor of other producer’s goods, yet maintains its own identity and operation, and another is a grocery retailer that operates by a franchisee/coop model, each distinct affiliate having an identity they give to their store(s) different from the others (although this isn’t explicitly a small town operation, but it’s still similar enough). If it already works in the real-world, then it’s far from a leap in logic to say it can continue to work and work on a larger scale. All people need to do is believe in themselves, and, yes, believe in the market, and the latter’s ability to swiftly signal the consumer base’s demands and expectations, and for producing/profit-making firms to quickly answer such signals in an attempt to stay ahead of their competition. While “corporate social responsibility” (properly understood) is an implicitly anticapitalist notion, the mere stringing of these words together isn’t necessarily a bad thing, but only insofar as we realize that the consumer has sovereignty on the market, and can effect real changes without needing to be coddled by any regulatory apparatuses.
Thus, it seems that in the free market the consumer is capable of having his cake (virtuous community life) and eating it (commercial vitality) too! What a wonderful thing.
Whatever that means in relation to me and my longwindedness.
See Christoper Lasch, The Culture of Narcissism; Paul Joseph Watson, “Modernity.”
See Murray Rothbard, Man, Economy, and State with Power and Market, 73-74, cf. 1297-300.
See on this ibid., 1363-65.
On economic mismanagement see Murray Rothbard, Power and Market (ibid., 1047-371); Ludwig von Mises, A Critique of Interventionism; Mark Thornton, The Skyscraper Curse; Sanford Ikeda, Dynamics of the Mixed Economy.
On the propertarian foundations of economic science see Murray Rothbard, The Ethics of Liberty, 35-44.
On the ethics of boycotts see ibid., 131-32.
After all, I’m a free-marketeer, not a central planner; cf. John Hasnas, “The Myth of the Rule of Law,” Wisconsin Law Review (1995): 226.