Occam's Razor

Are you feeling freer yet? From all the free market stuff happening, I mean.

What I’ve been noticing – and what you are probably noticing too – are all the vacant storefronts. Retailing must be in recession.

We have a tiny mall across the river from us. I was in there the other day looking for Christmas presents. It was in sad shape. It still has a couple of anchor stores: a JC Penny and a Target, but inside there were a lot of spaces for rent.

It’s similar in the little downtown in our city of 30,000. When we arrived four years ago, it was vibrant. It’s doing better than some but now there are plenty of storefronts to rent on what should be prime property: Main Street.

It’s not entirely bleak. Despite these empty storefronts, I still see a new small shopping plaza go up now and then. What’s going in though is not so much retail as mixed businesses: doctors offices, restaurants and maybe a fitness center. Increasingly, if I need to buy something I can’t get it locally, so I have to go online. I’d really prefer not to, but increasingly if I do want to buy it at a brick-and-mortar store, I have to drive twenty miles or so to Holyoke. Our local Staples went out of business. A Petco opened across the river at the mall and closed a couple of months later. Our local Walmart looks anemic. Here in Massachusetts, one of the few growth retail businesses is Dunkin Donuts. Apparently we can’t have enough of them.

Our city is at least trying to keep a local economy vibrant. Chain stores are fairly rare around here. We have one Starbucks downtown, but otherwise all our restaurants are local. There are local hardware stores, mainly because few want to cross the river to Hadley to go to the Home Depot or Lowes over there. While there are plenty of Dunkins, we don’t have a Wendy’s, and just one McDonald’s and Burger King on the north side of town. The reason these chains largely avoid us is probably that it doesn’t make economic sense: our market is too small and too far away. We have too few customers and too much hassle to truck stuff in, I’m guessing.

Another sign of the retail times: Amazon put up a new warehouse in Holyoke. It’s probably stocked by now, which means they probably have hired legions of employees at $15/hour to fulfill orders twenty four hours a day. Amazon pushes these people to crazy levels of productivity. They can walk nine miles or more day pulling stuff out of bins and they get metered to make sure they don’t take too many bathroom breaks. They might as well be cattle. They may get treated worse than cattle. Also new: Amazon trucks are making deliveries to the home. A couple of months ago, I never saw an Amazon truck.

Our area is trying to keep a local banking sector, with some modest success. The success is because they had one before the big banks arrived, but it’s not too hard to find a vacant bank storefront. Community banks are clearly suffering but fortunately seem to still dominate the local mega banks here. There is one Bank of America downtown, but they apparently don’t care about the local villages.

I confess I am part of the trend. While I’d like to set up an account at a local community bank, I can’t justify it. Online banks like the one I use, Ally, can offer us a much better deal because they don’t have expense of storefronts. We will get more than 2% interest on a CD at Ally. No community bank around here can compete with that. I also never changed my credit union, which recently offered a deal too good to pass up, though they are 400 miles away. I now get 2% cash back on my purchases, and no annual fee for their card. No local bank can match that either.

We are lucky though to have community banks. In many communities, they are gone. Back where we used to live in Northern Virginia, they were pretty much gone. There was a Citibank or Bank of America store every couple of miles or so, and if not a storefront, at least one of their ATMs. And you paid for the privilege with misery interest rates and plenty of creative fees.

Community banks at least tend to keep the money local, helping to stimulate the local economy. I’m sure Bank of America makes loans locally, but the profits don’t tend to stay in the area. They go to shareholders, or to inflated salaries. During the last recession, it was the big banks that tended to be most vulnerable, mostly because they were the most exposed. They held lots of toxic assets. Pushing those dubious home loans increased their profits in the short term, but when the recession hit it pushed them toward insolvency. Judged too big to fail, Uncle Sam largely bailed them out, letting them keep their short term profits while pushing the long term costs for their risky behavior onto taxpayers. There is every indication that we’ll see this scenario play out yet again in 2020 or 2021.

What I see is not so much competition as consolidation. I see lots of monopolies. I have no choice with my ISP, so it’s Comcast, unless I and a group of citizens can convince our city to create a municipal network. We pay Comcast close to $100 a month for 300 mbps download to the home. Airlines consolidate and raise prices. Entertainment companies consolidate and do the same thing. We saw a movie yesterday at the local Cinemark. We were assaulted but what felt like endless commercials before the movie, including three clips of popcorn popping and Coke fizzing. Need a potty break? They are playing in the restroom too.

These days, you buy out your competition while setting higher barriers for new entrants into these markets. The result is not really more efficiency, but a whole lot less competition, which makes these companies fat and sloppy. If they excel in anything it’s in buying out the competition and paying their employees poorly. Where else are they going to go? Their competition doesn’t largely exist anymore.

To me the worst of these is not Amazon, but ride sharing services Uber and Lyft. They represent everything that is wrong with our “free market” today. Their “innovation” was to sidestep regulators entirely, creating facts-on-the-ground of independent contractor drivers. Yes, it lowered fares, but it’s clear now that they are doing it by cheating their drivers, who largely don’t understand they are working for negative wages when you factor in the depreciation on their cars. Oh, and if you are a female passenger, you stand a decent change of sexual assault. Uber reported more than three thousand sexual assaults in 2018.

What we needed but don’t have is some sort of regulatory authority to decide whether these businesses should be allowed to start up in the first place. Uber and Lyft have, in effect, bypassed our wage and hour laws. In many areas of the country, you can’t get a taxi anymore. You must use Uber or Lyft if you don’t have a car.

What all this proves to me is that money talks. It gets us an oligarchy that is clearly in charge, at least at the federal level. For the rest of us, it just squeezes us more. It’s a new gilded age where only those with money get to profit. The rest of us are just lemon for the squeezing.