Main Street America and getting to be middle class
By Daniel Becker
We all know the arguments about the loss of good jobs. Automation, competition, outsourcing. We’ve been told that America was striking out to raise it’s status when it came to jobs. Don’t lament the loss of those blue collar manufacturing jobs to cheap labor. They aren’t worth it. Step up. The new jobs will pay more if you get educated. Well, an entire generation got educated, and they are now looking for a job that will just keep them at their status quo.
We seem fixated on just this singular aspect of the decline of the middle class. Well, there is an entire sector of our economy that was and is just as important to growing and keeping a middle class: Retail.
The entire economic focus on finance to the point of believing that all that is important to having a successful economy is to keep improving the efficiency of money has not only generated a formula for making money from money (CDO, CDS, ABS, subprime, leasing, arbitrage, shorting, longing, etc, etc, etc) it has also convinced us and made us act on the idea that consolidation is efficient and that efficiency is growth. The old “economies of scale” thingy.
Well, here from my friend is what he recalls of main street in Central Fall, RI. This is what we lost as a pathway into middle class for the sake of “efficiency”.
“When I was younger, Dexter Street was alive with activity. Anything you needed you could purchase on Dexter Street. There was a shoe store, two hardware stores, a jeweler, two bakeries, three or four restaurants, about 5 bars, a military store, two pharmacies, three barber shops, two liquor stores, about four of five variety stores, two meat markets and a fish store. They are all gone.”
It’s is not just the loss of the mills. Central Falls et al could have survived at a much greater level of prosperity if the people had not lost the only path to actually receiving benefit from outsourcing. But, with outsourcing came consolidation in not just manufacturing, but also in the end point distribution of all that consolidated manufacturing: Retail. The efficiency gained of the dollar producing a product outside the USA was consolidated by the move to consolidate the retail part (and wholesale too). The lack of share of productivity gains to the masses is not just do to the loss of manufacturing. It is also do to the loss of access to retailing.
Sure, we all thought it was grand buying something for much less than what Dexter Street Hardware USA could sell it for. We had more money in our pockets after the purchase. How’s your community doing now?
It’s not just industrial New England that lost retail as represented in the loss of “Main Street USA”, you know we are hearing of the destruction of the “heartland America” main street. I’m not talking about the loss of the cultural experience that “Main Street USA” represented, though there is that. We closed down for the sake of money efficiency, the other primary path to become middle class. In doing so, we also reduced the movement and thus booking of dollars within the local community. One dollar on Dexter Street, Central Falls, RI could potentially be booked in 31 businesses just by the owner of the business. Even if with that one dollar divided among the employees, that dollar still for the most part stayed in the community to be booked potentially 30 times. One dollar in Big Box Mall USA is divided up such that only a few cents per employee gets booked in the local community with the rest going up line to the few.
No, the trades related to construction can not make up for the loss of independent retail. Retail was a major cylinder in the small business engine of our economy. It was also a major path to political reality and activism.
It’s time we start broadening the discussion to beyond just money efficiency. Just as with the concept of the “free lunch” tax cut, that is, that there is no free lunch to growth via tax cuts so is it true with efficiency based on the slogan of “economies of scale” when talking about money’s roll in the entirety of society. That we can buy stuff from overseas cheaper at Big Box Mall USA is not enough of an answer to accepting this paradigm.
Well the way I see it we have been nibbling around the edges of this deal for months now and I have resurrected it again with my right wing friend when I sent him Robert Reich’s article on income inequality. Whatever a society–or species I suppose –produces, economics is the system for distributing that production. For a whole host of reasons from globalization, to the decline of unions, to tax structure etc, the production of the United States is increasingly being distributed to a very very very small fraction of its citizens. And I daresay that while growing the pie–ie increasing production–will allow more to dribble down to the vast majority of citizens, that is not a feasible means of continuing the current distribution system because our planet likely can not sustain the current level of production much less a large increase. Either we adopt a new system of distributing existing or perhaps scaled down production, or I think the whole thing is going to disintegrate.
terry: “Either we adopt a new system of distributing existing or perhaps scaled down production, or I think the whole thing is going to disintegrate.”
Mebbe so. But I think that there may be a lot we can learn from the past. It seems to me that the main thing that rebalanced society after the Industrial Revolution was the labor movement. And the current growth of inequality has been accompanied by a decline of the labor movement, and an assault upon it. Perhaps there is a causal connection there. Revitalizing the labor movement may be one of the best things that we can do.
(I know that that sounds detached, but I have never been gung ho for unions. Still, it is hard to ignore the pervasive assault on labor over the past 30 years. It continues with the lack of serious action to bring down unemployment.)
i can’t say for sure, but i can’t imagine independent retail and quaint downtowns handling the volume and variety of goods that people require. i can’t imagine, say, independent retail doing what best buy does. i can’t imagine independent retail doing what, say, whole foods does. i grew up in town with no bookstores, and now it has a barnes and noble AND a borders. this didn’t happen by accident: it happened because big retail does things very efficiently and so they can afford to put these stores in places like fort wayne indiana. these stores make people’s lives better.
independent retail died because big retail does things better. i can’t see, say, an independent retailer doing what best buy does or what whole foods does. compared to the 50s and 60s people buy a lot more things and there are a wider variety of consumer goods. hard to see how mom and pop operations could keep up with that outside of a few areas.
and another thing. i grew up in a small city with no bookstores. now it has a barnes and noble and a borders. it’s pretty much the same people; that hasn’t changed. what’s changed is that a large corporation with economies of scale can survive where an idiosyncratic poorly-funded independent store cannot. i think that’s a good thing.
Precisely the point if the local stores had been providing exceptional service they would survive. Actually Amazon is as much a threat to local stores as anything else, there is almost nothing that is not on Amazon today. Catalog operations in the past have always competed with local stores, Sears drove the general store out of business with its catalog, before in the 1920s going into retail in the large cities. I can recall growing up a small neighborhood grocery store where you told the clerk what you wanted, but it died after the owners passed on. It was a neighborhood of the 1920s. (Grandparents lived there). Chain grocery stores killed it.
If you think about it for example in mens King Size clothes a local store would have had to special order taking 6 weeks, but a catalog or web retailer can because it has one warehouse keep a stock.
So another place to blame is UPS and FedEx et.al. They killed off the local stores as well.
Net domestic profits earned by US corporations since 4Q 2008: $609B
Net decrease since then in the amount these companies spent on wages and benefits: $171B
-courtesy Harper’s Index Nov 2010
Starving our way to prosperity as Dr. Black put it.
It’s even worse than that, because the pie is shrinking.
And real median wages have stagnated for 40 years.
JzB (not V)
Almost nothing is purely good or purely bad. Having Borders is nice, but Thackery’s (RIP) was nicer.
I think you are quite missing the point.
I suggest you go back and re-read the last two paragraphs of the post.
Now THAT is the point!
Its not just money efficency its also service. In particular a small town person is no longer at the mercy of the local guys markup and poor service, Amazon and other Catalog services deliver quite well. It really is a long term trend that Sears started in the 1890s If you are a local merchant you better deliver better service or you will be toast. Here you sort of have the grand conundrum of economics that has existed forever, who pays and who gets the benefit. In the local retailer the customer pays for that, and the retailer wins. In the catalog model the local retailer looses. In essence its just further disintermediation killing off the middle men who may be important to the community but really don’t add any value to the consumer.
Cars. The shift from local stores to big boxes would have been tough without cars. Suburbs woundn’t have made much sense without cars.
When people see an opportunity to make money, they take it. Walton did. If the conditions we create as a society means there is money to be made in big box stores and big box banks, that’s what we will have. The story told here seems to have a normative thrust to it, but no indication of how the norms became what they are, or could be shifted from what they have become. Part of the answer is that we have had national policies that encouraged use of cars over use of public transit, and that subsidized home ownership in a way that allowed suburbanization – a way of living that assumes lots of driving.
While political activity on the part of oil, car, tire and construction companies is not the whole story, it is certainly part of the story. More recently, political activity on the part of financial companies has become a bigger part of the story. Already escaped genies don’t go readily back into the bottle, but we could certainly put a stopper in the bottle to keep more genies from escaping. Today’s NYT, though, reports on why we should not expect that to be so. Lots and lots of political money from lots and lots of rich industries.
Well unemployment and immigration are the two major items which make downward pressure on wages possible, and therefore corporate profits.
It’s hard for me to argue against loose immigration policy, but market forces are always going to be in favor of a certain level of unemployment. The government can attempt to stopgap that short term, but I do think that this is a situation where there is a very real limit. Not many things are affected by market prices. Labor is one of them. Commodities are another (not traded ones, I mean basic goods). Situations where you really do have many providers.
Well except that they don’t. Small bookstores have always had the ability to order a book for you, just like B&N. I’ve found increasingly that B&N or Borders have the same problem that Home Depot and Loews do in the hardware/lumber world. They are huge stores, you wander around trying to find what you want, and then ultimately they don’t have it, and they send you down the street to the next closest shop, or they tell you can they can special order it.
At that point I might as well have ordered it over the internet myself (hitting up abebooks) or gone to my local small bookstore and asked them to order it for me. Having the appearance of a library doesn’t do me any good if you don’t have the actual book I want, and when it comes to ‘catalog’ items they never do.
In such situations it’s almost always faster for me to use NOBLE or BPL’s online systems to have the book I want shipped to a local branch library where I can pick it up myself and then bring it back.
This is a classic example of people forgetting what a small local shop actually DOES. People don’t remember that you can go into a local hardware coop like a TruValue or Ace affiliate and get furniture recovered or screen windows repaired. Instead they go buy a new whatever.
Perhaps ironically, I think some of this may be undone to Main Street’s benefit when, inevitably, oil prices start rising significantly. The current distribution system works for WalMart and Amazon based on cheap transport costs. That changes when a gallon of diesel/gasoline quadruples in price.
Locally grown and produced goods become more appealing and can start competing on price at some point, starting with locally grown food vs. the factory-food high fructose corn syrup stuff and the cardboard-tasting salmonella-laced grocery store fare.
Yes, our entire concept of what good living is, which included cars, is the problem. Just like we live under the concept that perpetual increased efficiency of money is the singular purpose discounting the need to consider social efficiency. This is what lead us to cars. We do not see such concepts of living in other nations, not that there are not people in those nations pushing for a focus on just money efficiency as the singular need to have it all.
I did not address the how or suggest what could be done because I just wanted to point what is a major aspect of what has changed economically that gets little discussion other than when it comes up as a cultural issue. Like “the good old days”. Part of the fond memories are the product of a different economic structure, only we do not acknowledge that.
Rhode Island always has been full of radicals – ever since Roger Williams.
money efficiency=free market capitalism
that is all.
I love this article. I’m so glad it was posted here.
James Kunstler says oil prices are going to rise due to peak oil, and we are all going to be living and buying locally, which is what bob above is saying.
The system, as it now exists, favors employers over workers and big companies over small companies. Partly this is legal: the laws that make it difficult to unionize. And partly it has to do with government actions such as building the infrastructure that makes suburbs possible. If the government had built rail and trolly lines rather than highways, we would have more compact commuter suburbs with small-town downtowns. (These still exist north of the Chicago.) We would also have lots of still-living small towns at rail stops.
Ordinary people lose a lot: decent wages, money that stays in the community, living small towns and downtowns with business owners who are also neighbors.
And now the Kindle may kill bookstores, just like Blockbuster died from the internet. My wife and I have not bought a single, physical book since getting a kindle and iPad.
On the flip side, I live in Baltimore, and frequent lots of businesses that I can walk and bike to. Baltimore has had a bit of a renaissance in Urban living, which oddly was a positive result of the real estate bubble – more stores, and attractive places that are pulling people back in from teh burbs. The nature of the businesses are changing a bit, and we even have a local hardware store – 2 of them.
….and rampant corruption. Rum Runners are now drug runners. I couls tell you some crazy mob stories from my childhood days in RI.
Some of what we once bought locally won’t be bought locally again no matter how high the price of oil goes, and two of those things — books and movies — have already been mentioned. Personal finance is another. ATM vestibules and direct deposit plus internet banking have taken a huge bite out of another Main Street staple — the branch bank.
Yes, there are things that will not come back. However, if we do not consider the advantage such a structure gave us in distributing income and sustaining society as part of an overall economic system, then we will not know how to “go forward” as we look for solutions to the loss of the middle class and it’s roll in a viable democracy and economy.
We do not have to return to the “good old days” as in dialing back the clock, but we do need to develop policy that works to duplicate the results, that puts in place new structure to the flow of money that duplicates the flow when retail was the other major means to entry of the middle class.
If we are not going to tax the productivity gains that went to the top in excess historically, then we have to set in place structure, policy, machinery of money flow that assures the citizen does benefit from their gain in productivity and rise in inflation.
The other important issue is for the middle to never ever forget that they are only the middle and never believe they are of the rich class. That way they will not fall for the arguments regarding economic policy that only benefit those who primarily earn their money from money.
Once upon a time in America, there was a notion called anti competitive trade, and laws to enforce them. Sure the laws are still on the books, but rarely enforced when it comes to cost pricing disparities between large volume buyers vs. smaller volume buyers.
The idea that locally grown produce can sustain the demand of NYC and its burbs is insanity. You cannot grow enough, period. And that’s not even counting the diversity issue. Do you really want to go back to the turn of the century local diet?
The idea that we are going back to some kind of local-growth/organic food diet is nonsense. Transport costs of all that food wood be exorbitant – much more expensive than shipping in trainloads of food from the great plains – like we do today.
All your doing is signalling that you belong to the ‘right thinking’ group.
Get a grip.
Islam will change
In SoCal, there is a grocery chain called Fresh and Easy which aims for the locovore market. Virtually every item in the store is produced within 100 miles of the store. The offerings are usually far superior to what is available elsewhere. And usually cheaper. Things tend to be low chemical if not organic. And they can offer havarti for $5.00 per pound, undercutting the national brands in both taste and price. Local growing can be done, and be profitable.
Walton started out where there was no public transit the rural areas of the US, and then moved to the cities. I am sure that perhaps beyond a local Taxi or 2 Bentonville and Rogers Ark did not have public transit in the 1950s. In small towns there really is no alternative, the poster seems to have an urban focus. Where I grew up in the early 1950s a town of 8000 there was no public transit, all be it that it might only be 2 miles accross town.
In the US as opposed to Europe, anti competitive applied to the ultimate consumer not folks in the supply chain. Show how the volume discounts hurt the consumer because they enabled the consumer to pay less. Yes we used to have fair trade laws where the mfg could say sell at this price and like it, but that was anti consumer because discounting was forbidden.
The 1950s were a hundred million cars ago. We can’t reasonabley argue from the circumstances that obtained at the birth of the Ur-Mart and just extrapolate from that, ignoring all the policies, and the hundreds of billions of dollars of public money, that have supported car travel over bus and subway and train and bike travel over the subsequent half century.
We have made policy choices since the 1950s. We could have made other choices. Them’s just facts.
You gotta get a grip on buffy’s MO. The fact that he has snuck “organic” in there to make you more like the strawman he wants to fight is just the same ole buffy. That transportation prices do make a substantial difference in location of production over time is simple common sense, but when you attach “local” to it, then buffy will find a way to sneer at you.
The food we bring in from the Great Plains are largely down to grain and beans and stuff that eats grain. I am willing to believe that is most of buffy’s diet, but it is not most of mine. And since it isn’t most of mine, then buffy’s claim that “we” eat mostly out of trains is simply untrue. He may eat out of trains. I tend to eat out of trucks, boats and airplanes. Trucked in food is unlikely to change for urbanites, because local food arrives on trucks, just like distant food does. Boats, however, are a rather different story. The marginal cost of delivery by ocean going vessel is overwhelming determined by fuel costs. Same with airplane-delivered food (and flowers).
buffy has sneered his usual sneer, but really has his food-economy notions in a bit of a mess.
The past is another…you know. We not only can’t go back, but it may not be useful to use the past as a model. Drawing lessons from the past isn’t a bad idea, I suppose. The thing is, what we have today is our starting point. Small towns, small shops, small schools – they seem attractive to some of us, but to the extent they don’t fit into today’s economic web, they might create a bigger burden for those who end up there. Some of China’s “new cities” are pretty bleak. They didn’t grow naturally, so there is a bad match between physical structure and population. My point is that social engineering is really tricky stuff, and trying to engineer our way to smaller institutions might simply prove to us that we aren’t smart enough to pull it off.
What we need to do, instead, is stop subsidizing large institutions, and then let the rest work itself out. One simply change in that direction is carbon pricing that includes the externalities of carbon consumption in the price. If we end up with mega-cities as a result, so be it, as long as the mega-cities serve their inhabitants – and don’t crap on the folks downstream.
Not to worry. The 2020 Ford Mustang will run on 100% grain, and you will park it in the community barn. And we will recycle. Teenage girls will clamor for a Ford Pinto. Chrysler-Fiat introduces The Clint Eastwood. GM says goodbye and moves corporate headquarters to Beijing.
Lyle, I could be misaken, but I don’t think your opinion is quite right. Anti competitive behavior by manufacturers with regard to suppliers can be considered a violation of anti-trust law. That is not to say that discounting per say is not permitted. When the discounting exceeds the ability of one supplier to compete in the marketplace against a competitior, that would be “on its face” anti-competitive.
I agree, social engineering is not the way as it relates to engineering in detail. However, goal are what lead us to find a way. The past represents some goals that were achieved and produced a specific results. In this case greater diversification of the income produced, productivity gained and inflation experienced. All materialized in greater political equality.
It was done with blue collar jobs and retail being considered the minimum for providing to just above autonomus consumption. Both were the primary route to the American Dream. We have to find either replacements for this economic machinery or duplicate it. Or, we just let the economy continue on with it’s focus on making money assuming that it is the be all, end all, all else will fall in place. Not!
There are those who detest taxing those with more. Fine. I say to them: Then figure out a way to replace or duplicate the 2 primary vehicles used by the masses to achieve the Dream which resulted in greater power equality as exemplified in both share of income and the resultant freedom from life’s risks and political persuasion.
This assumes WE still want to obtain or at least move toward such a goal.
During the MS case it was stated that the US Justice department does not really get involved in business to business issues nearly as much as to consumer industries. Yes the law may read otherwise, but the Justice department may decide what to prosecute. Today the Justice department is to concerned with Terror and with financial shenanigans to bother on business to business anti-trust.
1) Increased specialization and efficiency in retail is a very widely dispersed good.In the case of Walmart, this is also significantly technological in nature.
2) When three seperate businesses were closing at different times in my former home town, the problem was not competition or box stores, but sucession. The parents had held the business for their children to take over, and the kids declined. I don’t know why the businesses were not sold, but I expect it was simple disapointment. There’s obviously observer bias here.
3) Even the big box stores are increasing efficiency by cutting price for “in store pickup”. You can save as much as 1/3 on the price of, say, a big screen TV by using this option. We’re headed back to the Sears catalog.
4) Universal applinces like general-purpose computers are taking over for multiple appliances. My twenty-somethings (2) own no television sets, DVD players or big-screens – they do it all on a computer. This can eclipse telephones and any number of other formerly single-purpose appliances.
5) For over ten years, the frontier for an MBA has been retail. This will continue.
What are people supposed to do? I don’t know.
I should add that Wal-Mart at least has figured out how to combine catalog and retail (perhaps copying the old old Sears). The have lots of items on the Web Site that are not in the stores because the volume would be to low. However they allow you to ship to their store for free. Given that trucks run from the Wal-Mart distribution centers to the stores every day, the incremental cost is close to zero, since a lot of items would go to each distribution center, and the systems there are as good as UPS has.
So it solves the cost of inventory problem of having physical goods in the store, but does not add much shipping cost.
BTW slightly off topic Wal-Mart has software to figure out the sales tax on all sales, you can’t tell me if Wal-Mart can do it that Amazon can not.
Buying anything at Walmart is not the way back to the future. Walmart holds a singular distinction in the eradication of small box retailing, off-shoring of American jobs, the reduction in family level wages and income across America, the loss of benefits and tax revenues, the rise of political patronage, and on and on. Anyone shopping Walmart is the problem, not part of the solution.
Buy the Japanese made car. Help destroy your own future.
Not sure who told you Fresh & Easy is after the Locavore market and that all the products sold in their stores are local, from 100 mile radious ,but they gave you a bum steer. Fresh & Easy, which is owned by the big British chain Tesco isn’t after the Locavore market at all. Some of their products are local but 95% of what they offer aren’t. And it would be hard to offer local Havarte cheese since it’s an import item. They aren’t anywhere as local products focused as Whole Foods and many other grocers. Not a cut on them. And they don’t claim to be after the Lacovore market in any way.