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Shopping as Theater or Grind

July 12, 2013

Liberties, Regulation, Retail

New Parkway Theatre

I recently watched a film in a movie theater in a ‘transitional’ neighborhood in Oakland and was more than pleasantly surprised on walking through the unimposing entrance to what could have been a very large garage. The scene opened up to a cheerful combination of café, pub and pizza parlor. Orders could be eaten in the pub or delivered to the several movie theaters in the back rooms which were furnished with comfortable sofas, armchairs and tables. I immediately started to wonder what zoning restrictions, business licenses, building codes, disabled access laws and liability insurance issues prevented most movie theaters from offering such an attractive movie going experience.

This got me thinking about how the state creates blandness and uniformity in so many of our other consumer experiences as well. For example, when I lived in London I was relatively close to one of the largest street markets in Europe. On busy market days the sights, sounds and smells were unforgettable, as stall holders bellowed their offers in rich cockney accents and socializing blended with business in an ever-changing tapestry of conversation and exchange, all knit together by the spontaneous order of countless small-time independent entrepreneurs. Compare this experience to visiting a typical American, big-box retailer or a regional shopping mall with a uniform design, the usual large corporate anchor tenants and the customary and familiar retail names filling a sterile and sanitized space managed by a top-down administration.

I am not unaware of  the genuine economies of scale that often favor larger enterprises (although there are dis-economies of scale too), nor am I unappreciative of the fact that the 21st century consumer has access to greater choice and a wider assortment of products than at any time in American history, but it is nevertheless a little appreciated fact that state power is the major force behind large, monopolistic, cartelized and bureaucratic corporate behemoths. For example, central planners like Robert Moses used state power in the form of eminent domain to literally bulldoze away vibrant communities in favor of highways that favored automobiles as the dominant urban transportation system, and consequently subsidized the growth of big box retailers that would have struggled to survive if they had been forced to construct and maintain their own mass transportation systems to bring customers to them.

Furthermore, retailers such as Walmart can afford to pay its employees such low wages only because up to 80 percent of its employees receive food stamps and so are subsidized by taxpayers through the state welfare system. In addition, competition for labor is reduced (which helps to keep salaries low) because large corporations inevitably capture regulators and use the regulatory apparatus to limit competition from smaller, nimbler and more aggressive competitors. They do this in by imposing fees, licensing requirements, capital requirements and other burdens that are more easily borne by larger companies. Furthermore, legal restrictions on trade unions make it harder for low income workers to organize for themselves collectively.

It should not be too surprising that most regional shopping malls in the U.S. look alike as most of them are owned by the same company, the Simon Property Group. What has virtually disappeared from all Simon properties over the last few years are the local retailers that bring some sort of uniqueness and local flavor to the mall. The reason for this is that Simon Properties can easily replace a local retailer with a national chain retailer who faces significantly lower occupancy costs because of the national account relationship with Simon Properties. In other words size matters and we have seen how the state acts to negate any dis-economies of scale (increased costs of communication and management, increased costs of maintaining heavier equipment, difficulty of accounting and allocating resources as more transactions are internalized within the firm, problem of re-gearing to respond to new challenges etc.) by socializing the costs and immunizing firms from competition.

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“There is more to life than increasing its speed.” Mahatma Gandhi

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About Malcolm Greenhill

Malcolm Greenhill is President of Sterling Futures, a fee-based financial advisory firm, based in San Francisco. I write about wealth related issues in the broadest sense of the word. When I am not writing, reading, working and spending time with family, I try to spend as much time as possible backpacking in the wilderness.

View all posts by Malcolm Greenhill

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21 Comments on “Shopping as Theater or Grind”

  1. Bonnie Marshall Says:

    A sense of village…sigh )

    Reply

  2. cattalespress Says:

    You really opened up my eyes on this one Malcolm–great post!

    Reply

  3. chr1 Says:

    In my experience, the West Coast is much more this way: a downtown core with strip malls further out and suburban sprawl. In Seattle, there are all kinds of similar mixed use projects popping up. A theater, Starbucks, some apartments/condos above.

    You seem to be arguing for a renewal of small business, bustling, invisible hand type market activity, or even a little nostalgia?

    As long as we don’t end up with the kind of crony capitalism created by the collectivists/communalist often found on the West Coast, blowing up the State into a huge regulating, taxing force with its fingers in everything, including the cookie cutter property development winners, I’m ok.

    But they’re not really going anywhere in the Bay Area I suspect.

    Maybe you should take a trip to London?

    Reply

    • Malcolm Greenhill Says:

      “You seem to be arguing for a renewal of small business, bustling, invisible hand type market activity, or even a little nostalgia?”

      Chris, thank you. I’m arguing for all of the above and also that the state has its fingers in everything to a far deeper degree than even most traditional libertarians realize. I think the left libertarians like Kevin Carson et al, are on to something here.

      Reply

  4. Morgan Mussell Says:

    Very pertinent post.

    Last week’s Sunday paper featured a story on one of Walmart’s non-profit foundations (that’s right…) making huge donations to the “favorite charities” of the Sacramento mayor and a city councilman ahead of this week’s vote to loosen regulations against big box stores in the downtown area. Downtown Sac is still a funky and interesting melange of small businesses, restaurants and galleries and older architecture. Nothing in the paper this week on how the vote went (maybe in fine print somewhere) so I guess that tells the story.

    Reply

  5. Jeff Hummel Says:

    Another nice post, Malcolm, although I wonder what legal restrictions facing labor unions you have in mind. In the U.S., I believe, unions still have more legal privileges than restrictions, although of course, not as many privileges as in Europe. I may be biased, however, being forced to pay regular tribute to that rent-seeking, lobbying organization known as the California Teachers Association.

    Reply

    • Malcolm Greenhill Says:

      “I wonder what legal restrictions facing labor unions you have in mind”

      Jeff, thank you. The most obvious forms of state intervention that hobble labor are legislation like:

      1) The provisions of Taft-Hartley which criminalize sympathy and boycott strikes;

      2) The Railway Labor Relations Act and the “cooling off” provisions of Taft-Hartley, which enable the government to prevent a strike from spreading to common carriers and thus becoming a general strike; and

      3) “Right-to-Work” laws, which restrict the freedom of contract by forbidding employers to enter into union shop contracts with a bargaining agent.

      Reply

  6. aaforringer Says:

    I keep trying to think of a good analogy of government and how it changes things and I guess the best example would be water.

    Water creeps into things slowly surely patiently and distorts, cracks, brings things into being things, that without water being the carrier would have never happened.

    Water erodes and changes landscapes.

    Water brings mold.

    Water transforms into ice cracking boulders.

    Water pushes out air leaving behind certain elements that change wood into stone. (Petrified wood).

    But water brings life as well.

    Just like the government- unintended, unforeseen consequences that change things forever. I am no anarchist, in that way lies madness, but I believe that we have too much water right now and it is creeping into everything.

    Malcolm not only do I enjoy your posts but a lot of your responses show that you have a firm grasp of history and economics, at least deeper and more thorough then my own. I enjoy stopping by and seeing what you have written.

    Reply

    • Malcolm Greenhill Says:

      Thank you. This is a very good analogy and it accurately illustrates the main point of the post that life would not just be different but radically different with a scaled down government.

      Reply

  7. Raunak Says:

    Malcolm, I’m glad we still have noisy markets here in India. Did witness similar open air markets in Colorado some years back and they were wonderful.

    Reading about the Simon Property Group reminded me of how similar all new airports across India look. A decade ago, airports in India were Government owned. Each airport had a unique design and individuality. Ever since privatization of airports kicked in around 10 years back, new terminals have come up across the country. Though sophisticated, the terminals all over seem to be designed by the same architect. The same structure of steel with edgy corners greets travelers to most cities. Its as if “one design suits all” was the motto of the developers.

    Reply

    • Malcolm Greenhill Says:

      Raunak, thank you for this international perspective. It would be interesting to see the hidden connections which no doubt exist between the private company building the airports and the government. These connections might include kickbacks, tit-for-tat favors, tax exemptions, political patronage, revolving door employment opportunities etc.

      Reply

  8. Michele Seminara Says:

    Hi Malcolm, great post – you turned what could be quite a dry subject into something very interesting, and more importantly, very human! Thank you.

    Reply

  9. aaforringer Says:

    Tried to find a place to leave a message or send you and e mail, but being unable to find anything like that I will leave it here. Thanks for recommending “The Adventures of Kavieler and Clay” just finished it this past week while on vacation, It was an extremely good read. Thanks again, good stuff, about creativity, history and the 40’s in particular.

    Reply

  10. mauradejaynes Says:

    I wonder if “the people” would be content with the knowledge that their tax money helps pay the labor at Wal-Mart (via welfare) meanwhile the cheap products they purchase “save them money” in the process???

    Reply

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