Wednesday, September 5, 2018

Labor and the conglomeration of everything.

Grocer, 1944. This guy wouldn't be working for himself, in this occupation, anymore.

One show that does capture a little of the high school experience many of us had is “Freaks and Geeks,” to which I’ve devoted a few evenings lately. One character is a guidance counselor who’s a little over-invested in his students’ lives. He’s always around, questioning the kids’ decisions and reminding them that the choices they make in high school will echo down the hallways of the rest of their lives.
This is a pretty common theme, and one that today’s students are likely to hear as classes kick off this week in the state. Even Linus from “Peanuts” gets in on the action. He tells Charlie Brown: “I think that the purpose of going to school is to get good grades so then you can go on to high school, and the purpose is to study hard so you can get good grades so you can go to college, and the purpose of going to college is so you can get good grades so you can go on to graduate school, and the purpose of that is to work hard and get good grades so we can get a job and be successful so that we can get married and have kids, so we can send them to grammar school to get good grades, so they can go to high school to get good grades so they can go to college and work hard…”
Mandy Burton from her article in the Casper Star Tribune, quoting from the late Charles Schultz's cartoon, Peanuts.

Pretty observant article, but not true so much anymore.  Today, Schultz's characters would have to say:
“I think that the purpose of going to school is to get good grades so then you can go on to high school, and the purpose is to study hard so you can get good grades so you can go to college, and the purpose of going to college is so you can get good grades so you can go on to graduate school, and the purpose of that is to work hard and get good grades so we can get a job and be successful move to a city you are not from and have no connections to so that we can get married and have kids, divorce and abandon them, so we can send them to grammar school to get good grades, so they can go to high school to get good grades so they can go to college and work hard and move on to where they have no connections…”
Grim view, I know. But a realistic one in the modern American economy.

I've posted a lot on this blog about the disappearance of various small businesses.  I haven't posted as much on those that have persevered so far, as its always easier to ignore that, although I do have one in the hopper on bars.

As part of what we're observing here this week in regards to Labor Day and the American celebration of labor, we might want to take a look at the conglomeration of absolutely everything.  Indeed, to my way of thinking, it's one of the worst things that's happened to the United States, and indeed the world, in the past century.

Americans are fond of thinking that they live in a free market, but they really do not.  A free market, in a pure sense, is a market in which every individual competes on a level playing field.  But that sort of market, to be truly free, would exist in the absence of corporate entities.  Ours clearly does not.  Indeed, it emphasizes them.

Now, the reason that matters is that corporations, in a state of nature so to speak, would be partnerships, which are assemblies of individuals who are still individuals.  Partnerships, if they are conventional partnerships, exist in a much different legal environment than corporations do.  Corporations may be assemblies of people, and of course are as people are behind all entities and things at the end of the day, but corporations are creatures of the state, created by the recognition of whichever state entity they are formed subject to, and recognized at law as a "person".*

That last thing is a profound legal concept.  Walmart, General Motors, or British Petroleum, for example, are all people in the eyes of the law. You know that they aren't, but at law they are. That means that under the law nearly everywhere they are legally liable as people for their torts, as compared to conventional partnerships in which every partner can be held individually liable for the acts of the partnership.  If that was the law in regards to shareholders and the liability of corporations, there's no way that they'd have grown so large and so predominant.

Additionally, in the United States, thanks to a ruling by the United States Supreme Court, corporations have the same right of speech that individuals do. That's an almost shocking proposition, but it's the law.  It's hard to believe, for example, that every shareholder of Amalgamated Amalgamated holds the same view as the board of directors, but that board can decide what the corporation thinks and how it spends its money on getting its message across.   That's the corporations speech, even if Mrs. Anon Jones in Passedonby, Florida, who is a shareholder, disagrees.

Corporations have been around for a long, long time and there's legitimate reasons to be sure for big and small ones.  The oldest one is debated as to that status.  Some claim the Dutch East India Company, which disappeared in 1799, was the first one, but that status is certainly challenged.

Logo of the Dutch East India Company.

Some claim that status for the Hudson's Bay Company, which has the advantage over the Dutch East India Company in that it is still around with popular stores in Canada now commonly nicknamed "The Bay".

The flag of the Hudson's Bay Company.

While the Hudson's Bay Company hasn't folded in, like the Dutch East India Company, it isn't what it once was, sadly. None the less the company that could and should claim that it made it to the what would be come the American Pacific Coast well in advance of Lewis and Clark was formed on May 2, 1670, a long while back.**

Both of those corporations are sorts of exceptions to the early rule, which is interesting in that they were both retail and manufacturing, with HBC being particularly that way.  The manufacturing aspect of them is what caused the need for their corporate status to exist.  A giant financial enterprise on that scale simply couldn't exist as a partnership, and we won't pretend otherwise.  Corporations are not only the backbone to the Corporate Capitalist system we actually have, but a necessary element of it. The question explored here is a bit different than that.

Before we move on, determining the oldest corporation in the United States would be a little more difficult, although I'm sure it could be done.  There are some really old ones to be sure, with some old businesses that were not incorporated (at least originally) dating back to the 17th Century.  The oldest corporation, oddly enough, appears to be a perfume company, still in existence, but it's hard to tell that for sure.

What something like this tends to show us is that corporations really arrived on the scene for really large commercial trading operations in the 1600s and have been with us ever since.  And over time, they've come to predominate in all sorts of ways more and more.

It's easy to pretend this is a really modern trend, and it is if we take a long view of modern. But it didn't occur within just the last couple of decades.  Certainly big manufacturing came in with the Industrial Revolution.  Big retail came in shortly after that.  Department stores, which are the immediate predecessors of all big box retail, date back to the early 19th Century.  Macy's, which is in every American burg of mid size and up, was founded as a dry goods store in 1858, two years prior to the Civil War.  A whole host of companies that some would recognize now and some would not, followed.  All of them no doubt incorporated early on.

Indeed, at some point some of the older department stores yielded to the newer ones like Target.  Anyway you look at it, the most emblematic of the modern American giganto stores is Walmart, which is absolutely everywhere.

Its with Walmart that it gets tempting, although it would probably be a bit deceptive, to start to claim everything changed.  Before Walmart, for example, there was K Mart, and certainly at one time K Mart seemed like a big deal. But Walmart was exceptionally aggressive in moving into every single market and every single niche that seemed to exist.  At least at our local K Mart (which I haven't been in since the kids were small) you can now buy groceries, for example, but that's only because Walmart did it first.

Walmart has a business model which basically sets to sell everything on earth for the lowest possible price.  It does that by a variety of means, but one of the means is that, once it grew large enough, it pressured manufacturers to lower their costs.  The manufacturers had no choice and in order to do that they've had to do what any manufacturer in a global market has had to do under price pressure, manufacture overseas and with the cheapest parts that the consumers can tolerate using.

As this has happened its been devastating to local retail.

Walmart's backers like to pretend that its "low low prices" benefit everyone but that's very far from true.  What low low prices have done is meant that certain entire sectors of the local economy have closed.  It used to be the case that things like radios, televisions, stoves, and appliances, as well as clothing and the like, were typically bought by local vendors.  I'm in my mid 50s and I can well recall all of that being the case.  Maybe you'd also look at Penney's, Sears or K Mart, but chances are that the local prices weren't far off and were competitive.  Not any more.

And that has meant, by extension, that occupations that people once held in small retail have died.  A person would have to be willing to endure a lot of economic risks to open up a small dry goods store, or an appliance store, or a jewelry store today.  Indeed, a person would have to be willing to endure a whole lot of risk to open a conventional grocery store.

Now, not all of that can be blamed on Walmart, but on the overall trend.  Through the corporate vehicle, size and mass have spread into everything.

Take the popular television advertisement we see in which we're informed that "He want to Jared's" symbolizes undying love.  It might, but Jared's is owned by Sterling Jewelers, a company that was founded in 1910 and which is now owned by Signet Jewelers Ltd, a British company. The parent company has stores all over the globe and just purchased an internet based jewelry company.
 Sidewalk clock of a former jewelry store.  The store closed when the owner retired.  It was a family business that had been in that family for at least two generations.  I'm not saying that big national chains killed it or anything, but if I were entering the business today I'd surely consider my national and international competition before I did so.

Now, I'm  not saying that either of those business entities is bad in some fashion, but let's be fair. Jewelry stores used to almost exclusively the domain of families, which made a decent middle class, and independent, living on them.


So were grocery stores, although that's long ceased to be the case.  All groceries used to be local but just over a century ago Piggly Wiggly moved into with a different business model and now almost everyone buys their regular groceries from a grocery store that's a huge chain.

Now in fairness to those chains, and fairness is due, a strong grocery union means that the jobs at grocery stores actually are generally good middle class jobs with benefits and retirement.  But they aren't small locally owned as a rule anymore.  Oh, sure, you can find a locally owned store, but it will likely be a specialty store.  And perhaps that's both the model and the exception to the rule.  And as noted, in recent years grocery stores, which at least were generally single purpose in mind, have had to compete with Walmart and the like, which now include groceries in them, thereby removing the connection with the local and the course more and more.

And there's hardly anything that hasn't succumbed to this model, or which isn't in danger of of falling to it.  There are still local book stores and record stores, but they struggle against national chains, or increasingly, the Internet.***  There are still local automotive garages, but think of the easy service end of that chain, such as lubrication, and once again you have the chains.****

And even industries which don't have a giant big box store to compete with face the problem of conglomeration.  Even in the legal field, which is generally a model of modern guild practice, we now see larger and larger firms in big cities planting roots in the mid sized ones, and giant ones based in huge cities moving into the big cities.  The trend is obvious.

You can, if you look hard enough, and live in a town big enough, find local businesses.  But if you stop to consider what the big box stores are offering and then compare that to the town in which you live, you'll get a clue as to what you'll find in the first instance. And then as you drive down the street and look at the national chains its all the more apparent.

Now, I'm not saying that everything local is gone. Indeed, just a couple of months ago, while working on one of our trucks, I was reminded of how many local industrial mechanics shops still remain and indeed, in order to rebuilt the batter connectors for our 1997 Dodge D1500 we had to go to those local shops as the big national chain batter shop here that had just opened a large new store didn't have what we needed. The small one catering to garages did however, along with a lot of helpful advice that proved critical to the enterprise.

But more and more this is an exception to the rule.

The question is, of course, whether or not this is bad.

And it is.

The problem with this gigantic conglomeration of everything is multi fold, but at least in part what it has done is to take middle class occupations and shoved the former owners of them down into lower wage brackets.  Local grocery stores that supported a family of owners, for example, are gone, and that family has had to do something else, probably a couple something else's, in order to support themselves.  Or at least, they are supporting themselves directly through what they own.

Likewise, families that would have owned any number of local enterprises to support themselves now must work for other enterprises quite often. Sure, there are multiple exceptions, and of course a lot of chains are actually franchises, which is another matter entirely.  But there can be no doubt that a young couple that might wish to open an appliance store and support a young family has to really question their decision.

Beyond that, there's a certain center of mass, or gravitational pull, aspect to this.  I've noticed this in the legal field for a long time.

The practice of law used to feature a lot of very broadly practicing lawyers, many of them absolutely excellent, located throughout a state.  I've detailed it before already, but the practice of law began to shift in the 1970s when the Baby Boomers came into it as they shifted the business model to emphasize making money over everything else.*****Coincident with this, large firms began to increasingly expand into multiple states. The money aspect of this drew off a number of graduates of local law schools to the bigger markets, but the majority of graduates of state schools still went on to practice in their states, very often in the communities they were from.  This is no longer true.

Now, the gravitational pull had caused a cycle in which bigger and bigger firms sought to penetrate smaller and smaller markets, to the detriment of the local practitioner.  This created a crisis in employment for those just graduating law schools which in turn helped bring about the disaster of the Uniform Bar Exam, which allowed "transportability".  That transportability became a vehicle to accelerate the penetration by big firms, but ironically big regional firms have become the victims of giant national firms that seek to do the same thing.  The local lawyer has increasingly gone from a general practitioner skilled at everything to a specialized one occupying the markets that are suited for only the local.  But the practice hasn't improved at all.  Indeed, it's gotten increasingly unbearable for the practitioners and the overall quality certainly isn't any better.

The irony of all of this is that it doesn't have to be.  The concept of incorporation was never really meant to lead to the conglomeration of everything, and in prior eras when conglomeration grew too extensive, at least in the United States the law, in the form of the Sherman Anti Trust Act, stepped in to address it. Now things are far, far, more extensive than they ever were.  But only because we allow it.

During the recent primary election the GOP candidates all came around to how local business could and can be helped.  I doubt that anyone is really going to do anything, but here's an area that certainly could be done.  Large scale manufacturing is certainly a different animal, but retail and the service industries have become conglomerated simply because we chose to allow it to occur, or even encouraged it.  We ought to ask, at least a bit, if in doing that "for" our communities, we instead "doing" something to them, and it wasn't a pleasant thing to do.


*Indeed, one of the really bizarre ironies of Capitalism v. Socialism is that modern Capitalism, which is really Corporate Capitalism, strong favors the big, but not as much as real Socialism, which doesn't work and which is pretty much extinct, which favors the biggest.  Socialist don't think of it that way, but real Socialism favors the creation of a giant monopoly in which a giant Corporation, if you will, the state, owns and controls everything with the people as the theoretical shareholders, if you will (but in reality, the government is and doesn't care much about its patrons, the people).

**It's odd to me that real backers of Capitalism so rarely cite the example of the Hudson's Bay Company which is the one real example we have a giant corporation serving its interests by basically ruling the northern half of a continent and successfully enforcing the peace while enriching its more or less subjects.  It's a Capitalists success story of epic proportions really.

***Indeed, Internet retailers are posed to be the next step in this, wiping out even big entities in favor of remote cyber ones.  It is, of course, happening.

****Garages themselves, however, hold on.  Perhaps their work is too individualistic to fail.

*****It was at that point that the "billable hour", much discussed in legal circles, came in and began to dominate. 

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